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Hogs Fall on Signs of Rising Pork Supplies; Cattle Gain

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Aug. 20 (Bloomberg) -- Hog futures fell for the first time in three sessions on signs of rising U.S. pork supplies as producers sent more animals to slaughter because of higher feed costs amid the widespread drought. Cattle increased.

Meatpackers processed 2.17 million hogs in the week ended Aug. 18, up 6.6 percent from the previous week, and an estimated 424,000 hogs were slaughtered today, up 1.9 percent, according to the U.S. Department of Agriculture. Carcass weights averaged 203.44 pounds (92.3 kilograms) on Aug. 17, 1.8 percent more than a year earlier. Futures have dropped 5.5 percent this month.

“We are really going to challenge this hog market with huge production,” Dennis Smith, an analyst at Archer Financial Services in Chicago, said in a telephone interview. “Sow slaughter is on the increase, and average hog weights are heavy and starting to move higher.”

Hog futures for October settlement fell 0.4 percent to close at 75.9 cents a pound at 1 p.m. on the Chicago Mercantile Exchange. The price has dropped 10 percent this year.

More than half of the Midwest was in severe drought as of the week ended Aug. 13, according to the U.S. Drought Monitor. The price of corn, the main ingredient in livestock feed, surged 60 percent from June 15 through Aug. 17.

Cattle futures for October delivery rose 0.2 percent to $1.25475 a pound. The price has climbed 3.3 percent in 2012.

Wholesale beef rose 4.4 percent last week, and as of midday, the price reached $1.9339, the highest since July 5, government data show. Grocers are increasing purchases before the Labor Day holiday on Sept. 3, when consumers often grill outdoors, said Dick Quiter, an account executive at McFarland Commodities LLC in Chicago.

Feeder-cattle futures for October settlement gained 0.4 percent to $1.4405 a pound.

To contact the reporter on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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