Chicago Mercantile Exchange hog futures on Tuesday posted modest losses led by profit-taking following a recent string of market advances, traders and analysts said.
Funds sold the October contract and bought deferred months in conjunction with the Standard + Poor's Goldman Sachs Commodity Index (S+PGSCI).
Funds that follow the S+PGSCI shifted, or rolled, their CME hog and live cattle October long positions mainly into December. Tuesday was the second of five days for the process.
October hogs closed down 0.025 cent to 90.85 cents per pound and December at 87.55 cents, down 0.075 cent (all figures US$).
Uncertainty about cash hog prices in the near term weighed on the October contract.
The U.S. Department of Agriculture on Tuesday morning reported the average hog price in the eastern Midwest up nine cents per hundredweight (cwt) from Monday to $86.46. Cash prices elsewhere in the Midwest were unavailable.
Searing heat in the central Midwest slowed down hog weight gains and curtailed the movement of animals to market, which is supportive for cash prices.
"Normally this time of year you're not worrying about the heat, but the western corn belt has been a blowtorch," U.S. Commodities analyst Don Roose said.
From Monday to Tuesday, packers processed 847,000 hogs, 26,000 less than a year ago for the same period, according to USDA data.
The overall seasonal increase in supplies and packers cutting slaughter rates to offset a brief drop in hog numbers are negative cash factors.
Fewer hogs now coupled with the cutback in slaughter put wholesale pork prices up for a third straight day.
USDA data showed the wholesale pork price, or cutout, Tuesday morning at $96.76 per cwt, up 62 from Monday.
Speculative buyers shied away from deferred CME hog contracts in the belief those trading months are over-valued based on cash prices expectations for that time frame.
Live cattle down with beef prices
Eroding wholesale beef prices and funds shifting their October long positions into deferred contracts pressured CME live cattle, analysts and traders said.
October closed 0.325 cent/lb. lower at 125.025 cents, while December ended at 128.65 cents, down 0.075 cent.
The U.S. government on Tuesday morning showed the wholesale choice beef price, or cutout, at $193.82/cwt, down 51 cents from Monday. Select cuts fell $1.03 to $178.83.
Sultry conditions in the western Plains curbed cattle weight gains and dented beef demand.
Investors are expecting cash cattle to trade steady to possibly lower with last week's mostly $123/cwt.
More cattle for sale, sluggish beef demand and thinning packer margins could keep a lid on cash returns.
Estimated margins for U.S. beef packers on Tuesday were a positive $6.20 per head, compared with a positive $13.25 on Monday and a positive $9.50 a week ago, according to HedgersEdge.com.
Some deferred cattle contracts hovered around 130 cents, which sidelined would-be buyers.
Futures built in premiums in anticipation of tighter cattle supplies at lighter weight as feedlots discontinue use of the feed additive Zilmax.
"There are expectations for higher (cash) prices to resume, but right now we're waiting to see that happen," said Allendale Inc. chief strategist Rich Nelson.
Weak CME live cattle and firm corn prices, which may reduce feedlot demand for young cattle, undercut CME feeder cattle.
September closed down 0.2 cent/lb. to 156.4 cents, while October finished at 157.775 cents, 0.275 cent lower.
-- Theopolis Waters reports on cattle and hog futures for Reuters from Chicago.