Smaller Hogs, But Bigger Prices

July 23, 2015 05:00 AM
Smaller Hogs, But Bigger Prices

Hog futures climbed the most in almost six years as hot weather in the U.S. Midwest led to smaller pigs.

Hogs don’t eat as much in the heat, and with recent temperatures in the region exceeding 90 degrees Fahrenheit (32.2 degrees Celsius), they came in three pounds (1.4 kilograms) lighter Tuesday than a year earlier. Last week weights touched the lowest since October 2013, according to U.S. Department of Agriculture data.

That pushed up hog futures Wednesday by the three-cent limit, to 65.4 cents a pound on the Chicago Mercantile Exchange. The 4.8 percent move is the most since October 2009.

Futures prices have been sliding, down 36 percent in the 12 months through Wednesday. Farmers expanded production amid record prices in mid-2014 in the wake of a virus that killed millions of piglets. The U.S. hog population increased 9 percent to 66.9 million on June 1 from a year earlier, according to the most recent USDA data.

Hog prices may be close to a bottom, said Dick Quiter, an account executive at McFarland Commodities in Chicago.

October and December futures contracts are trading in the low- to mid-60-cent range, a discount to the current cash price. The CME Lean Hog Index, a cash-price gauge, was 79.66 cents a pound Wednesday. Cash market and futures market prices typically converge as contracts expire.

“Especially with the discount in October and December hogs to where cash is, I can’t imagine you can go a whole lot lower,” Quiter said in a telephone interview.

Wholesale prices are also seeing a reversal. They jumped the most in seven weeks Tuesday as good weather prompts consumers to fire up their grills and grocery stores are pushing pork that’s $1.48 cheaper per pound than beef.

“People have been out grilling and utilizing the good weather,” Lou Arens, a broker at PCI Advisory Services in Waucoma, Iowa, said in a telephone interview. “We saw a lot of retailers pushing pork this week, especially here in northeastern Iowa, so there must be good movement on that, leading retailers to buy more and refill stockpiles.”


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