Sign in Subscribe
Newspaper publishing

Chicago Mercantile Exchange Lean Hog and Pork Belly Futures Drop Sharply

Strategic Insights

— 2 min read

Uncertainty about demand, broken chart support levels, and a spreading U.S. trade rift with China contributed to the sharp decline in Chicago Mercantile Exchange lean hog and pork belly futures on Monday. The uncertainty sparked concerns about a possible further slowing of pork export sales and seasonally larger hog supplies in the weeks ahead. Additionally, a potential ban on U.S. pork imports due to the discovery of novel H1N1 influenza in Mexico and the U.S. in late April added to the pressure. Lower corn prices also weighed on deferred hogs as cheaper feed costs may encourage some hog producers to maintain the size of their herds.

Key Takeaways:

  • Lean hog futures tumbled to one-week lows, with losses in most contracts ranging from 1% to nearly 3%.
  • Concerns about a possible further slowing of pork export sales and seasonally larger hog supplies in the weeks ahead added to the pressure.
  • The U.S. trade rift with China could limit sales of all meats and extend the ban on imports of U.S. pork.
  • Flat-to-weaker cash market reports along with lower wholesale pork prices on Friday contributed to the slide.
  • Lower corn prices weighed on deferred hogs, as cheaper feed costs may encourage some hog producers to maintain the size of their herds.
  • The final day of the official "Goldman roll" period, in which funds are shifting long positions out of October and into December, pressured the front month.
  • October lean hogs closed down 152 points, or 2.9%, at 50.95 cents a pound.
  • Most-active December hogs fell 82 points to 49.00 cents.
  • February pork bellies, the only contract traded, followed lean hogs down and fell 130 points to 87.00 cents.
  • Some traders are concerned about demand for beef overall following the Labor Day holiday week amid competition from pork and chicken.
  • December cattle hit a one-week low, while front-month October matched Friday's low near 10-day moving average support.

Statistics:

  • Lean hog futures fell 152 points, or 2.9%, to 50.95 cents a pound in October.
  • Most-active December hogs fell 82 points to 49.00 cents.
  • February pork bellies fell 130 points to 87.00 cents.
  • October live cattle ended 17 points lower at 87.05 cents a pound.
  • December cattle was off 25 points at 86.67 cents.
  • September feeder cattle were down 32 points at 98.85 cents, and October was down 40 at 98.92 cents.

Sources:

  • Dow Jones Commodities News via Comtex, "Chicago Mercantile Exchange lean hog and pork belly futures fall sharply", September 14, 2009.
  • Comtex SmarTrend Alert, "UPTREND on 12-09-2008 for CME @ $227.04", September 10, 2009.
  • Comtex News Network, Inc., "SmarTrend is a registered trademark of Comtex News Network, Inc."

Read more