COMMODITIES : Signs of Rising Hog Supply Drive Pork Futures Lower
Pork futures posted steep losses Tuesday on the Chicago Mercantile Exchange, with frozen pork belly prices plunging their permitted daily limit of 2 cents a pound on indications of a sharp increase in hog supplies.
On other markets, grains and soybeans were higher; precious metals were lower; energy futures fell dramatically, and stock index futures advanced.
The weakness in pork was rooted in the cash hog markets, where larger-than-expected supplies of market-ready hogs pushed prices down $1.50 to $2 per hundredweight, said Tom O’Hare, livestock market analyst with Smith Barney, Harris Upham & Co. in New York.
“It was just a matter of too many available for what demand was coming,” he said.
Kills also were higher than expected with an estimated 321,000 hogs slaughtered Tuesday, compared to 307,000 on the same date a year ago.
An unusually large spring pig crop will ensure against supply problems this fall, and the amount of pork bellies and other pork products in cold storage remains at near-record levels.
The bearish sentiment spread to the adjacent cattle pits, where selling led to a modest deflation of cattle futures prices, according to O’Hare.
Live cattle settled 0.30 cent to 1.03 cents lower, with the contract for delivery in October at 70.97 cents a pound; feeder cattle were 0.10 cent to 0.62 cent lower, with September at 81.07 cents a pound; hogs were 1.27 cents lower to 0.60 cent higher, with October at 37.55 cents a pound, and frozen pork bellies were 1.77 cents to 2 cents lower, with February at 1.98 cents a pound.
Crude-oil futures plunged to their lowest levels since October, 1986, on signs of continuing discord within the Organization of Petroleum Exporting Countries, analysts said.
West Texas Intermediate crude oil settled 36 cents to 55 cents lower, with October at $14.24 a barrel; heating oil was 1.17 cents to 1.39 cents lower, with October at 41.71 cents a gallon, and unleaded gasoline was 1.05 cents to 1.45 cents lower, with October at 42.53 cents a gallon.
Wheat futures prices on the Chicago Board of Trade settled at their highest levels since July 5--when the year’s highs were set--on a variety of signs construed as bullish for export sales. Other grains and soybeans also gained.
A Canadian government estimate that Canada would harvest 15.4 million metric tons of wheat, the smallest crop in 13 years, helped spur the wheat market, which had been rallying quietly for about two weeks, analysts said.
The report Friday from Statistics Canada prompted concerns that Canada may be forced to reduce its wheat exports.
New bids from Jordan and Iraq for U.S. wheat and expectations of new demand from other countries--including the Soviet Union--also supported wheat futures, said Katharina Zimmer, a grain analyst with Merrill Lynch Capital Markets in New York.
The USDA announced after the close that private exporters had sold 550,000 metric tons of U.S. corn to the Soviet Union for the 1988-89 marketing year and that an additional 252,400 metric tons of corn had been switched to the Soviet Union from other destinations.
Wheat settled 6 cents to 10 cents higher, with the contract for delivery in September at $4.095 a bushel; corn was 1.75 cents to 5 cents higher, with September at $2.935 a bushel; oats were 8 cents to 11.5 cents higher, with September at $2.71 a bushel, and soybeans were 8.5 cents to 17.25 cents higher, with September at $8.88 a bushel.
The inflation-sensitive precious metals futures declined modestly on New York’s Commodity Exchange, reflecting the opposing tugs of lower oil prices, which were bearish, and higher grain prices and a weaker dollar, which were bullish, analysts said.
Gold settled $2.60 to $2.70 lower, with October at $429.20 an ounce; silver was 3.3 cents to 3.8 cents lower, with September at $6.485 an ounce.
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