CME Lean Hogs Draw Support From Cash Price Discounts

Chicago Mercantile Exchange lean hog futures finished higher on Monday, helped by their discounts to cash prices and technical buying, traders said. 

Thinly-traded July, which will expired at noon CDT (1700 GMT), settled down 0.200 cent per pound at 92.400 cents and almost par with CME's hog index for July 13 at 92.78 cents. 

Most-actively traded August closed 0.875 cent per pound higher at 80.775 cents. October finished 0.875 cent higher at 68.050 cents, and above the 100-day moving average of 67.368 cents. 

Fundamentally, market bears contend that cash prices are close to peaking seasonally as more hogs come to market in the months ahead. 

Bullish investors argue that two new packing plants slated to open during the second half of the year will absorb the extra supplies. 

Allendale chief strategist Rich Nelson said that market participants for the most part are patiently waiting for cash prices to post a seasonal top rather than panicking. 

Investors continue to monitor wholesale pork demand led by record-high prices for pork bellies in the midst of the summer bacon-lettuce-tomato sandwich season. 

The U.S. Department of Agriculture's daily hog slaughter report on Monday suggests a Midwest packing plant may have been offline for maintenance. 

Mainly Higher Live Cattle Futures

Most CME live cattle contracts landed in positive trading territory after some investors sold August futures and simultaneously bought deferred months while awaiting this week's cash prices, said traders. 

August ended 0.850 cent per pound lower at 116.950 cents. October closed up 0.050 cent to 118.625 cents, and December up 0.250 cent to 119.250 cent. 

Traders sold August futures despite the first uptick in both choice and select wholesale, or cutout, beef prices since June 12. 

"The cutout being up today (Monday) may be short-lived because we're still in the 'dog days of summer' that normally hurt meat demand," a trader said. 

He added that some processors may be in the market for cattle whose numbers seems to have tightened in parts of the U.S. Plains as beef prices at wholesale come down from their lofty levels a few weeks ago. 

Last week market-ready, or cash cattle, in the U.S. Plains moved at mostly $118 to $121.50 per cwt, up as much as $4 from the week before. 

Investors await Wednesday's Fed Cattle Exchange sale of 2,912 head animals that a week earlier brought $117.25 to $118.75 per cwt. 

Firmer CME live cattle futures and sharply higher cash feeder cattle prices pulled up CME feeder cattle futures. 

August feeders ended up 0.150 cent per pound at 154.825 cents.