U.S. hog futures extended gains for a second straight day on Wednesday, bolstered by higher prices for hogs in the cash market, said analysts and traders.
They said futures buyers also viewed the decline in hog weights as an indication that the seasonal decline in hog prices may have ended.
Chicago Mercantile Exchange (CME) spot October hogs closed 0.65 cent higher at 74.75 cents and December finished at 74.725 cents, up 0.525 cents (all figures US$).
The average hog price in the most-watched Iowa/Minnesota market was $68.80, $2.39 higher than on Tuesday and the third increase in as many days.
The government's weekly average weight data showed hogs in the Iowa/southern Minnesota market last week at 268 pounds, down 1.6 lbs. from the week before and 0.4 lbs. less than the same period a year ago.
Still, continued ramped-up hog production, as high-priced feed forced hog farmers to reduce their herds, pulled wholesale pork prices down to their lowest of the year.
"The hogs were there and weights were record-high which put a lot of volume on the market," said independent market analyst Bob Brown.
The U.S. Department of Agriculture pegged the wholesale pork price on Wednesday at $75.54, down 88 cents from Tuesday.
Packers so far this week processed 1.307 million hogs, which was the same as last week but 31,000 more than a year ago for the same period, said USDA.
Cattle steady to firm
Spot October CME live cattle ended down 0.05 cent/lb. to 126.35 cents, weighed by cash price uncertainty while drawing down-side support from higher wholesale beef prices, said traders.
Remaining contracts landed in positive trading territory as traders adjusted positioning before the government's monthly cattle-on-feed report on Friday.
Fund buying in most-actively traded December developed after it cleared the 20-day moving average of 128.86 cents. It closed at 129.1 cents, up 0.225 cent.
Meanwhile, investors waited for cash cattle to change hands.
While packers remained quiet about their intentions, cattle owners in the Plains priced their animals at $128 or more, said feedlot sources.
The keys for cash are tight supplies, unprofitable margins and demand for beef, a trader said.
The wholesale choice beef price on Wednesday was $194.92 per hundredweight (cwt), up 65 cents from Monday, but select cuts were down four cents to $183.96, according to government estimates.
Some attributed the recent uptick in beef values to packers raising costs to grocers to offset higher cattle prices. Others said strong buying from grocers amid tight supplies supported wholesale prices that could turn soon.
"A lot of folks are thinking grocers are going to complete their buying for early October retail sales, and as a consequence the wholesale market could turn downward," said Vaught Futures Insights president Dan Vaught.
HedgersEdge.com estimated the average beef packer margin for Wednesday at negative $25.30 per head, compared with negative $33.55 on Tuesday and negative $24.35 on Sept. 12.
Feeder cattle settled lower as corn prices rallied, pressuring input costs for cattle feedlots.
Spot September CME feeder cattle ended 0.45 cent/cwt lower to 144.825 cents. Most-actively traded October ended at 147 cents, down 0.375 cent.
-- Theopolis Waters writes for Reuters from Chicago.
