COMMODITIES : Pork Futures Drop Daily Trading Limit
Prices of pork futures plummeted their daily limits Thursday for the second consecutive session as traders wrestled with weak demand for pork products and abundant supplies of pork bellies.
On other markets, soybean and oat futures soared, precious metals gained, energy futures fell and stock index futures retreated.
The Commodity Research Bureau’s index of 21 agricultural and industrial commodities advanced 1.87 to 258.20.
Weak wholesale demand for pork products has slowed packer demand for hogs, raising fears that a backlog of slaughter-ready animals has developed, analysts said.
“You’ve got a lot of people who really believe we’ve got tons and tons of pork coming down the road,” said Thomas Morgan, president of Sterling Research in Arlington Heights, Ill. “That’s what’s got the hog markets in a tizzy.”
Meanwhile, supplies of frozen pork bellies, which are sliced to make bacon, have reached near-record proportions. Prices of pork belly futures have fallen sharply this week and may have to come down even more to stimulate demand, analysts said.
The August hog contract plunged the 1.5-cent daily limit, settling at 48.70 cents a pound. Most pork belly contracts fell the 2-cents-a-pound daily limit.
Analysts said cattle futures fell in sympathy with pork prices.
Live cattle settled 0.05 cent to 0.47 cent lower, with the contract for delivery in June at 72.37 cents a pound; feeder cattle were 0.27 cent lower to 0.22 cent higher, with August at 75.30 cents a pound; hogs were 1.50 cents lower to 0.23 cent higher, with June at 51 cents a pound, and frozen pork bellies were 1.50 cents to 2 cents lower, with July at 50.87 cents a pound.
Soybean and oat futures prices soared, while other grain futures advanced modestly on the Chicago Board of Trade amid diminishing prospects for rain next week in the Midwest.
Soybeans gyrated wildly during the session as private meteorologists reduced the amount of rain in their forecasts.
Most oat contracts advanced the expanded daily limit of 15 cents a bushel as forecasts indicated no improvement in the drought conditions plaguing the upper Midwest.
“They’re saying a lot of the damage is irreversible,” said Victor Lespinasse, a trader with Dean Witter Reynolds Inc. in Chicago.
Limits on oats, soybeans, soybean meal and corn were expanded by 50% Monday after two straight days of maximum permissible gains. The limits will return to normal today.
After the close, the Agriculture Department issued its monthly report on U.S. wheat production and grain supply and demand.
The USDA reduced its 1988 wheat production estimate to 1.57 billion bushels from 1.62 billion bushels. But the estimate was above most analysts’ expectations and was pronounced slightly bearish for futures prices.
The USDA slightly increased its projections for soybean and corn ending stocks for both the current marketing year and the 1988-89 year while reducing its projected wheat ending stocks for both years.
But Lespinasse said the data were based on conditions June 1 “and a lot of (drought) damage has been done since June 1.”
Wheat settled 2 cents lower to 5 cents higher, with July at $3.72 a bushel; corn was 2 cents lower to 2.75 cents higher, with July at $2.5375 a bushel; oats were 11 cents to 15 cents higher, with July at $2.50 a bushel, and soybeans were 4.50 cents to 30.50 cents higher, with July at $8.86 a bushel.
Tables, Page 8
