Hog Futures Lowest of Year While Diesel Futures Hit Two-Year High

Hog futures fell to the lowest close this year on Thursday as meatpackers seized on low cash prices to slaughter swine at a record rate.

Two new pork packing plants that opened in the Midwest in September have increased U.S. pork processing capacity. That has sparked record-high slaughter numbers for this time of year without a corresponding increase in demand, said Craig VanDyke of Top Third Ag Marketing.

Analysts say the added capacity should eventually boost cash market prices for slaughter-ready hogs as packers compete to fill their plants. But that effect is likely to be delayed by rising hog weights, falling meat prices and weaker-than-expected pork exports.

“There ain’t a single bullish factor out there,” Mr. VanDyke said. “Without any love from the demand side, it’s going to be hard to keep any support on the cash.”

Hog futures on Thursday fell to a low for the year. October lean hog contracts at the Chicago Mercantile Exchange fell 2.3% to 57.325 cents a pound, the lowest close since Dec. 13. December-dated contracts fell 3.6% to 57.8 cents a pound.

Cash hog prices were expected to fall again on Thursday after dropping every day for over two weeks. That has helped push pork-packing margins just short of $50 a head, the highest in months.

Cattle futures, meanwhile, eased after closing near their upper limit on Wednesday. Traders anticipated an uptick in cash prices this week after cattle traded for $106.67 per 100 pounds at Wednesday morning’s Fed Cattle Exchange auction, up $2 from last week’s average.

The auction volume of a little over 600 was light, however, and there was no follow through trade as packers and feedlots butted heads over prices. Traders were waiting to see if a trend for the week emerged before placing further bets on higher cattle futures.

CME October live cattle contracts fell 0.8% to $1.101 a pound.

Grain and soybean futures were mixed on Thursday, closing largely unchanged amid pressure from a stronger dollar.

The greenback popped on Wednesday after the Federal Reserve signaled it could raise interest rates again this year and said it would start shrinking its portfolio of bonds.

The higher dollar, which makes U.S. crops more expensive relative to global competitors, weighed down grain and soybean futures late Wednesday and Thursday morning. Prices eventually steadied as money flowed back into the commodity sector, with crude oil futures easing off overnight lows.

Strong export demand for U.S. crops also helped push those markets higher. The U.S. Department of Agriculture said that exporters sold 2.34 million metric tons of soybeans in the week ended Sept. 14. That was well above the high end of analyst expectations at 1.6 million tons.

Analysts said that was further evidence of the robust appetite for American soybeans, particularly from China, that could help to offset an expected increase in production this year.

Wheat export sales of 307,200 tons and 526,900 tons of corn were within the range of expectations.

Soybean futures for November delivery closed 0.1% higher at $9.70 3/4 a bushel at the Chicago Board of Trade. CBOT December corn futures also gained 0.1% to $3.50 1/4 a bushel, while December wheat climbed 0.6% to $4.52 1/2 a bushel.

Cotton prices dropped lower Thursday despite quickening shipments of U.S. cotton overseas.

Cotton for December delivery fell 1.4% to end at 68.25 cents a pound on the ICE futures U.S. exchange. The weekly government report on sales and shipments of fiber overseas showed net sales of cotton at 278,000 bales, with shipment at 181,000 bales.

Oil prices wavered between small gains and losses Thursday, as investors awaited clues on whether OPEC will do more to ease a global supply glut.

Light, sweet crude for November delivery fell 14 cents, or 0.3%, to $50.55 a barrel on the New York Mercantile Exchange. Brent crude, the global benchmark, edged down 0.2% to $56.43.

Gasoline futures fell 0.7% to $1.6438 a gallon and diesel futures advanced 0.5% to $1.8153 a gallon — their highest close since July 2015.

Natural gas prices fell for the third straight session Thursday, as inventories grew more than expected for the second straight week.

Futures for October delivery fell 14.8 cents, or 4.8%, to $2.946 a million British thermal units on the New York Mercantile Exchange.

The S&P 500 lost 0.3 percent, snapping a four-day winning streak, the Dow fell 0.25 percent and Nasdaq dropped 0.5 percent on Thursday as the U.S. equity market braced for a third interest rate hike this year. The United States ordering new sanctions against North Korea was also seen to have weighed on Wall Street.

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