Hogs Rise on Signs of Shrinking U.S. Pork Supply; Cattle Prices Are Steady

Hog futures rose for the second straight day on speculation that demand for U.S. pork is outpacing the supply of animals to slaughterhouses. Cattle also gained.

Wholesale pork climbed to 86.86 cents a pound yesterday, the highest level since June 1, according to the U.S. Department of Agriculture. Meatpackers processed 1.16 million hogs in the first three days of this week, 6.9 percent fewer than last year. In June, the U.S. herd was 3.6 percent smaller than a year earlier after two years of losses spurred farmers to cut supply.

“Demand is probably pretty good at this point, and I would also assume that the relatively low slaughter we’ve seen this week is inspiring some confidence,” said Dan Vaught, the owner of Vaught Futures Insights in Altus, Arkansas. “People are thinking that the numbers available to the industry over the short run will tend to be limited.”

Hog futures for October settlement rose 0.725 cent, or 1 percent, to close at 76.95 cents a pound at 1:08 p.m. on the Chicago Mercantile Exchange. The price has jumped 46 percent in the past year as supplies shrank and demand recovered from the recession.

In May, U.S. pork exports rose 18 percent to 362.8 million pounds (164,600 metric tons) from a year earlier, according to the most-recent USDA data.

Cattle Market

Cattle futures for October delivery rose 0.275 cent, or 0.3 percent, to 94.2 cents a pound. The most-active contract is up 4.6 percent this month. Feeder-cattle futures for August settlement dropped 0.25 cent, or 0.2 percent, to $1.1485 a pound.

Packers processed 384,000 cattle in the first three days of this week, down 0.5 percent from a week earlier, according to the USDA. Feedlots bought 1.628 million young cattle last month, fewer than analysts estimated, the USDA said July 23.

“Feedlot supplies are not at all overwhelming, and producers have been moving cattle in a very timely manner,” Vaught said. “Underlying beef demand is pretty good, but right now seasonal concerns have limited the upside potential.”

Cattle futures earlier fell to the lowest price since July 15 on speculation that slowing beef shipments by meatpackers signal U.S. demand is shrinking.

Yesterday, packers shipped 2.77 million pounds of choice beef, the lowest amount since July 2, USDA data show. Demand in the U.S. tends to slacken in late July and early August as temperatures peak and fewer people grill outdoors.

Beef “movement had been pretty good, but it slowed down a little bit last week, and this week it hasn’t exactly been very robust,” said Mark Schultz, the chief analyst at Northstar Commodity Investment Co. in Minneapolis.

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

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