Hog Futures Decline on Signs of Slowing Demand for U.S. Pork; Cattle Fall

Hog futures fell for the first time in three sessions on speculation that meatpackers are buying fewer animals as the high cost of pork slows retail demand for the meat. Cattle gained.

Slaughterhouses processed 768,000 hogs in the first two days of this week, 2.9 percent fewer than a week earlier, U.S. Department of Agriculture data show. Wholesale pork prices are down 0.9 percent since reaching a 20-month high two weeks ago, according to the department.

“We’ve hit some real reluctance on the retail end and consumer end to high-priced pork,” said Dick Quiter, an account executive at McFarland Commodities LLC in Chicago. “Packers have been cutting kills. We could stay under some pressure.”

Hog futures for June settlement dropped 0.525 cent, or 0.6 percent, to 85.325 cents a pound on the Chicago Mercantile Exchange. The most-active contract has increased 26 percent in the past year as U.S. producers cut herd sizes and pork demand recovered from the recession and the swine flu outbreak.

The price of hogs for immediate delivery at slaughterhouses sank 1.5 percent yesterday to 84.28 cents a pound, the lowest this month, USDA data show. Wholesale prices have dropped for two straight weeks and yesterday were at 89.85 cents a pound, down from 90.71 cents on April 26.

Cattle Market

Cattle futures for June delivery rose 0.1 cent, or 0.1 percent, to 96.8 cents a pound on the CME, the eighth gain in nine sessions. Feeder-cattle futures for August settlement declined 0.325 cent, or 0.3 percent, to $1.156 a pound.

A report of shrinking beef output supported cattle futures, said Elaine Johnson, an analyst at CattleHedging.com in Westminster, Colorado. U.S. beef supplies, a gauge of production and imports, may total 28.537 billion pounds in 2011, the least since 1997, the USDA said today.

“We haven’t seen any indication of herd rebuilding,” Johnson said. “People are seeing tightening supplies down the road.”

Futures also got a boost from higher spot-market prices, Johnson said. Cash steers traded for about $1 a pound yesterday, more than 3 cents higher than June futures, according to USDA data. Grocers may still have some “last-minute” beef buying to do before the Memorial Day weekend at the end of May, when many Americans grill outdoors, Johnson said.

“Cash is staying strong, and to me, that’s the main impetus,” Johnson said. “There’s some talk that some folks still need to cover their Memorial Day needs, and that may be holding the meat up.”

To contact the reporter on this story: Whitney McFerron in Chicago at wmcferron1@bloomberg.net.

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