LIVESTOCK-U.S. hog futures fall as supplies rise

Wed Oct 9, 2013 6:55pm EDT
 
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* Lower beef price pressures CME live cattle
    * Feeder cattle futures settle mixed
    * S. Korea suspends imports of some U.S. beef

    By Theopolis Waters
    CHICAGO, Oct 9 (Reuters) - Chicago Mercantile Exchange hog
futures dropped sharply on Wednesday in reaction to a seasonal
bump in supplies that could pressure cash hog and wholesale pork
values.
    Armed with profitable margins and ample supplies, packers
plan to process roughly 140,000 hogs on Saturday, analysts and
hog buyers said.
    Wednesday's hog prices in direct and terminal markets were
mostly steady to $1 per hundredweight (cwt) lower, traders said.
    Estimated margins for U.S. pork packers on Wednesday were a
positive $14.25 per head, compared with a positive $13.95 on
Tuesday and a positive $17.05 last week, according to
HedgersEdge.com.
    Investors also sold hog futures amid concerns about how spot
October hogs will settle on Oct. 14 without U.S. Department of
Agriculture cash hog price data. The data has been suspended
during the partial U.S. government shutdown.
    The CME Group Inc recently outlined how it will
determine the final settlement price for the October 2013 lean
hog contract if the U.S. government closure persists.
 
    "I don't want to be in that spot month not knowing what cash
is doing," a trader said.
    Funds liquidated long positions in the December contract
after it fell below where the 10-day and 20-day moving averages
converged at 87.32 cents.
    Spot October hog futures finished at 89.825 cents
per lb, down 1.400 cents. Most-actively traded December 
closed 1.675 cents lower at 86.525 cents.

    CATTLE DOWN WITH BEEF   
    CME live cattle futures were hit by profit taking in
response to weaker wholesale beef prices, traders said.
    Wednesday's wholesale choice beef price, or cutout, dropped
50 cents per cwt from Tuesday to $191.97. The select price was
$177.92, down 62 cents, as quoted by Urner Barry.
    Despite inconsistent beef demand and poor margins, traders
expect packers to pay at least steady money for cattle that are
in short supply this week.
    Cash cattle bids in Texas and Kansas surfaced at $124 per
cwt versus spotty asking prices of $128 and higher, feedlots
sources said. Cash-basis cattle last week traded at $125 to
$126.
    HedgersEdge.com estimated margins for U.S. beef packers on
Wednesday at a negative $37.40 per head, compared with a
negative $41.95 on Tuesday and a negative $40.90 last week.
    The threat of more live cattle deliveries against CME
October live cattle futures, which will expire on Oct. 31,
weighed on that contract. So far, 26 contracts have been
delivered
    The belief that futures' are overpriced given last week's
cash cattle returns, pressured several contracts.
    South Korea has suspended some U.S. beef imports after
detecting the feed additive zilpaterol in meat supplied by a
unit of JBS USA Holdings Inc.  
    The South Korean situation is going to prove to be a
localized issue, said Citigroup futures specialist Sterling
Smith.
    "The loss of 60,000 cattle in South Dakota due to a recent
blizzard is probably a bigger concern because it creates a
market imbalance," he said.
    Disaster aid will be slow to come for South Dakota ranchers
who lost as many as 60,000 head of cattle during an historic
blizzard over the weekend, industry officials said on Tuesday.
 
    October cattle closed down 0.275 cent per lb at
128.000 cents while December finished at 131.950 cents,
down 0.375 cent.
    Weak CME live cattle pressured October feeder cattle
futures, while tight supplies underpinned the November feeder
contract.
    October feeder cattle ended down 0.250 cent per lb
at 164.550 cents. November settled at 166.375 cents, up
0.050 cent.