Hog Futures Advance as U.S. Pork Demand May Outpace Supply; Cattle Decline

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

Wholesale pork rose 0.5 percent yesterday to 90.94 cents a pound, U.S. Department of Agriculture data show. Meatpackers processed 2.12 million hogs last week, 6.7 percent fewer than a year earlier. Farmers have slashed hog herds after high feed costs and the recession spurred losses in 2008 and 2009.

Wholesale pork “is still holding in there,” said Tom Cawthorne, the director of hog marketing at R.J. O’Brien & Associates in Chicago. “We’re hearing that next week the numbers are going to be tight, and the packer is still going to want to put together a big kill because he has good margins.”

Hog futures for October settlement rose 1.15 cents, or 1.5 percent, to 77.45 cents a pound at 11:57 a.m. on the Chicago Mercantile Exchange. Before today, the most-active contract was up 16 percent this year.

As of last week, stockpiles of pork bellies in warehouses monitored by the CME were 99 percent smaller than a year earlier, at 424,000 pounds. Pork bellies are cured and sliced to make bacon. Pork-belly futures for February delivery climbed for a fifth straight session on the CME to $1.057 a pound.

Cattle Market

Cattle futures for October delivery fell 0.25 cent, or 0.3 percent, to 97 cents a pound on the CME. Before today, the most- active contract was up 13 percent this year. Feeder-cattle futures for October settlement dropped 0.375 cent, or 0.3 percent, to $1.12125 a pound.

Wholesale choice beef declined 0.4 percent at midday to $1.6086 a pound, the lowest level since Aug. 19, according to the USDA.

Feeder cattle were pressured by speculation that the USDA will report tomorrow that U.S. corn inventories are shrinking, said Lawrence Kane, a market adviser at Stewart-Peterson Group in Yates City, Illinois. Higher prices for corn, the main ingredient in feed, may slow herd expansion.

Corn stockpiles in 2011 may reach 1.101 billion bushels, down 16 percent from the previous USDA estimate, according to a Bloomberg News survey. The USDA will release estimates at 8:30 a.m. tomorrow in Washington.

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

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