An Agriculture Department report indicating that hog supplies next spring and summer may be larger than expected sent hog and pork belly prices plummeting Monday at the Chicago Mercantile Exchange.
Pork belly prices closed limit-down in several months, while hog prices also fell the limit before gaining some strength at the close.
The quarterly report buoyed grain prices, while soybean prices were mixed.
In other markets, oil prices tumbled, live cattle prices rallied, feeder cattle were mixed, gold and silver futures prices advanced and coffee prices fell sharply.
At the Mercantile Exchange, “the big news was the hog and pig report,” said Tom Morgan, president of Sterling Research Corp. in Arlington Heights, Ill.
The quarterly report, released after the close of trading Friday, showed higher-than-expected numbers of pigs to be born in the coming months, which will mean larger spring and summer hog supplies than anticipated, Morgan said,
The report sent pork belly prices tumbling, and they closed down their daily 2-cents-a-pound limit in all but one contract month. Hog prices fell their daily 1.5-cent limit during the session but recovered some of the lost ground before the close.
“There’s more hogs coming down the road than what people were looking for, and that’s why the market sold off, particularly in the deferred months,” Morgan said.
Cattle prices got a boost from a stronger cash market and expectations of tightening cattle supplies in the coming months, Morgan said.
Grain Futures Advance
Live cattle settled unchanged to 0.60 cent higher, with the contract for delivery in October at 72.35 cents a pound; feeder cattle were 0.15 cent lower to 0.10 cent higher, with October at 82.50 cents a pound; hogs were 0.13 cent to 1.42 cents lower, with October at 39.20 cents a pound, and frozen pork bellies were 1.95 to 2 cents lower, with February at 50.32 cents a pound.
Prices of grain futures were mostly higher while soybean prices were mixed at the Chicago Board of Trade.
“Wheat and corn benefited from Friday’s (USDA) quarterly stocks report, which showed a little less corn and wheat . . . than expected,” said Victor Lespinasse, a trader in Chicago with Dean Witter Reynolds Inc.
Another bullish signal came from the USDA’s pig report, Lespinasse said, as corn is a major food source for pigs.
The soy complex, especially soybean meal--another important feed for pigs--also gained some support from the pig report, as well as from the strength in the wheat and bean pits, he said.
Wheat settled 1.5 to 7.5 cents higher, with the contract for delivery in December at $4.2225 a bushel; corn settled unchanged to 5 cents higher, with December at $2.90 cents a bushel; oats were 3.25 to 7 cents higher, with December at $2.485 a bushel, and soybeans settled 7 cents lower to 4 cents higher, with November at $8.17 a bushel.
Oil prices continued their steep descent, flirting with the $13-a-barrel level in a stiff test of lows not seen in two years.
Saudis Won’t Freeze Output
The November contract of West Texas Intermediate, the benchmark U.S. crude, which plunged 55 cents a barrel Friday, skidded an additional 31 cents to settle at $13.06 a barrel on the New York Mercantile Exchange. Crude prices haven’t closed this low since August, 1986.
Saudi Arabia, OPEC’s largest producer and the world’s biggest exporter, issued a sharply worded statement late in the day saying that while it believes returning to prescribed production levels “is the best way for restoring full stability” to world oil markets, it will not “freeze” its own production while others continue to violate their ceilings.
Crude oil settled 28 to 31 cents lower, with November at $13.06 a barrel; heating oil was 0.94 cent to 1.05 cents lower, with November at 37.78 cents a gallon, and unleaded gas was 0.25 to 0.95 cent lower, with November at 41.98 cents a gallon.
Gold and silver futures prices seemed immune to weakness in the crude oil market and rallied on the New York Commodity Exchange, “largely to correct an oversold condition,” said Bernard Savaiko, an analyst with Paine Webber Inc. in New York.
Gold prices settled $3 to $3.20 higher, with the contract for delivery in October at $397.50 an ounce; silver prices settled 11 to 11.3 cents higher, with October at $6.248 an ounce.
Coffee futures prices fell sharply on expectations that Arabica coffees--those traded at the Coffee, Sugar & Cocoa Exchange in New York--will become more available because of the International Coffee Organization’s compromise plan for 1988-89, announced over the weekend.
The organization set an initial export quota at 58 million bags, but will allow for somewhat less than that depending on market conditions. Traders had anticipated a smaller initial quota that would increase prices, analysts said.
Coffee prices settled unchanged to 5.64 cents lower, with December at $1.262 a pound.