Tumbling Belly Prices Pressure Hog Futures
August 16 2017 - 2:16PM
Dow Jones News
By Benjamin Parkin
Hog futures fell sharply after a steep drop in pork-belly
prices.
A pound of pork bellies, used to make bacon, fell 15.54 cents,
to $1.8059 a pound, as of midday Wednesday. A run-up in belly
prices to highs in recent months buttressed the hog market, helping
limit losses despite growing supplies of pork. Slaughter numbers
and pork production rose to multimonth highs last week.
Wednesday's turnaround weighed down lean hog futures at the
Chicago Mercantile Exchange, however, which opened higher before
falling. The October contract fell 2.5%, to 68.775 cents a pound,
the lowest close in over three months.
"It's all about bellies. We've been waiting for this market to
break on bellies, and we've finally got it," said Craig VanDyke, an
analyst at advisory firm Top Third Ag Marketing in Chicago. "It
looks absolutely ugly."
Cattle futures also fell, under pressure from weaker cash
prices. Feedlots didn't sell any cattle at the online Fed Cattle
Exchange auction on Wednesday morning, turning down bids from
meatpackers. Sales so far this week have mostly been at $1.10 a
pound live, down from around $1.15 a pound last week.
Analysts say many feedlots will be reluctant to sell at those
levels. They will need to sell cattle at $108.50 per 100 pounds for
August and $112.50 per 100 pounds for September in order to break
even, according to CattleHedging.com owner Larry Hicks.
Bids approaching those levels could prompt a standoff between
meatpackers and feedlots.
"Producers are fighting it," Mr. Hicks said. "As we move towards
or below break evens, they're going to become resistant."
Most-active CME October live cattle futures fell 0.7%, to
$1.08325 a pound, while September feeder cattle contracts closed
2.5% lower, at $1.43125 a pound.
Write to Benjamin Parkin at benjamin.parkin@wsj.com
(END) Dow Jones Newswires
August 16, 2017 15:01 ET (19:01 GMT)
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