Lean hog futures dive by daily trading limit - CME

Cattle markets end mostly down
calendar icon 2 October 2023
clock icon 2 minute read

Chicago Mercantile Exchange (CME) lean hog futures tumbled by the daily trading limit on Friday under pressure from stronger-than-expected productivity in US herds, Reuters reported, citing analysts.

The US Department of Agriculture (USDA), in a quarterly report issued after trading ended on Thursday, surprised analysts by reporting the average pigs saved per litter reached 11.61 for the June-August period, up about 4.3% from a year earlier. That was above the highest estimate from analysts surveyed by Reuters, who on average expected a 2% increase.

Traders reviewed the data and overall herd size as low pig prices and high operational costs have made it unprofitable for producers to raise hogs.

Overall, the inventory of all US hogs and pigs on Sept. 1 was up 0.3% from a year earlier at 74.3 million head, while analysts expected a decline of 0.8%.

"We have seen the shrinkage in the breeding herd because of the poor margins. Because of the greater pigs per litter, we're offsetting that," said Arlan Suderman, chief commodities economist for broker StoneX.

Most-active CME December lean hogs sank 3.75 cents to finish at 71.775 cents per pound. On Monday, the daily limit will temporarily expand to 5.5 cents.

Some general selling in commodities markets weighed on livestock futures, traders said. Oil prices settled 1% lower.

Economic concerns also loomed, traders said, ahead of an expected US government shutdown and as the United Auto Workers expanded their strike.

US consumer confidence in September dropped to a four-month low, weighed down by persistent worries about higher prices and rising fears of a recession.

"When you get that kind of consumer uncertainty, they tend to be less willing to pay up for the more expensive cuts of meat," Suderman said.

In CME's cattle markets, most-active November feeders ended down 2.775 cents at 254.900 cents per pound. Most-active December live cattle dropped 2.5 cents to 187.925 cents per pound.

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