Bloomberg News

Hog Futures Drop to 19-Month Low on Pork Supply; Cattle Decline

August 03, 2012

Hog prices tumbled to a 19-month low on signs that the worsening U.S. drought is forcing farmers to sell more animals for slaughter to limit losses on higher feed costs, boosting pork supplies. Cattle futures also declined.

More than 55 percent of the Midwest is in severe drought as of July 31, the U.S. Drought Monitor showed. Wholesale pork yesterday fell 1.3 percent to 92.78 cents a pound, the biggest drop since July 3, according to the U.S. Department of Agriculture. The agency reported that meatpackers processed 1.62 million hogs in the first four days of this week, up 1.4 percent from a week earlier. Hog futures have dropped 17 percent since mid-June as corn costs jumped 60 percent.

“We’re obviously liquidating, and that’s putting a little bit more pressure on the product market,” Jason Golly, a vice president of risk-management marketing at Lynch Livestock Inc., said in a telephone interview from Waucoma, Iowa.

Hog futures for October settlement slumped 3 percent to settle at 75.85 cents a pound at 1 p.m. on the Chicago Mercantile Exchange, after reaching 75.8 cents, the lowest since Dec. 21, 2010. Prices are down 6.7 percent for the week, the first drop since July 13.

Hot, dry conditions are expected to persist through October and spread in parts of North Dakota and Texas, according to the U.S. Climate Prediction Center’s drought outlook.

Cattle futures for October delivery fell 0.6 percent to $1.24375 a pound in Chicago. Prices have gained 2.4 percent in 2012.

Feeder-cattle futures for October settlement slid 1.3 percent to $1.40125 a pound on the CME.

To contact the reporter on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net


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