Hog Futures Drop as High Pork Prices Reduce Grocer Demand; Cattle Advance

Hog futures fell to the lowest level in almost three weeks on speculation that U.S. retail pork demand is slowing after wholesale prices climbed to an all-time high. Cattle gained.

Wholesale pork fell to 91.23 cents a pound yesterday, down 5.7 percent from the record 96.74 cents on Aug. 24, government data show. Supplies of the meat had dwindled and grocers stocked up before the Labor Day holiday on Sept. 6, when many people grill outdoors. Meatpackers processed 1.221 million hogs in the first three days of this week, or 6 percent less than a year earlier.

Pork was “at record levels, so it’s going to have to soften up to get some movement going,” said Chad Henderson, a market analyst at Prime Agricultural Consultants Inc. in Brookfield, Wisconsin. “Packers have great margins, but if they think they’re going to struggle to move product, they won’t keep it higher” in price, he said.

Hog futures for October settlement fell 0.2 cent, or 0.3 percent, to close at 74.95 cents a pound at 1 p.m. on the Chicago Mercantile Exchange. Earlier, the price touched 74.1 cents, the lowest level since Aug. 12. The most-active contract dropped 4.9 percent in August, the fourth straight monthly decline.

“Historically, that week following Labor Day weekend is never a real barnburner for demand,” said Walt Hackney, the owner of Hackney Ag in Omaha, Nebraska. “There’s some anticipation of a slow product trade this coming week” as grilling season ends, he said.

Cattle Market

Cattle futures for October delivery rose 0.475 cent, or 0.5 percent, to 97.75 cents a pound, snapping a six-session slide. The price advanced 2.8 percent last month. Feeder-cattle futures for October settlement fell 0.25 cent, or 0.2 percent, to $1.1485 a pound.

Higher corn costs may discourage feedlots from expanding herds, pressuring feeder-cattle futures, Hackney said. Cattle may be sold to meatpackers at lighter weights, curbing beef supplies and boosting prices for fattened animals, he said.

Corn reached $4.4725 a bushel today on the Chicago Board of Trade, the highest level since June 2009. The grain has jumped 26 percent in the past three months.

Boosting animal weights is “dramatically” more costly, Hackney said. Feedlots may “sell cattle prematurely to avoid extended feeding,” he said.

Feeder cattle are young animals that weigh 500 pounds (227 kilograms) to 800 pounds. They are fattened in feedlots on corn until they weigh about 1,200 pounds, and then sold to meatpackers.

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

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