U.S. lean hog futures jumped to a one-month high on Friday on positioning ahead of a government cold storage report and as firming cash markets and tightening hog supplies extended the strongest two-week rally since June.
Live cattle futures traded mixed as investors squared positions and moved to the sidelines ahead of the U.S. Agriculture Department's cattle on feed report due for release, along with the cold storage report, at 2 p.m. CT.
"Pre-report positioning ahead of cattle on feed and monthly cold storage numbers appears to be the major push in the livestock today, and probably helps explain the continued softening of the fat cattle market and the subsequent firming of the hog futures," said Mike Zuzolo, president of Global Commodity Analytics.
Pork producers have stepped up slaughter schedules ahead of National Pork Month in October and hogs were becoming increasingly difficult to source, pushing cash prices higher and triggering short-covering and technical buying in futures.
USDA estimated the week's hog slaughter through Saturday at 2.406 million head, just below last week's estimated 2.428-million-head slaughter which, if realized, would be the third-largest weekly kill on record.
"It appears the bulge in market hogs at the farm level is tightening a little bit and packers are having a harder time and have to bid up and stretch to fill out very sizable slaughter schedules," said John Ginzel, analyst with Linn Group.
Spot October Chicago Mercantile Exchange lean hogs closed up 0.95 cent per pound at 75.8 cents, the highest for a spot month since Aug. 21. The spot contract was up 2.4 per cent for the week.
Actively traded December rose 0.775 cent to 74.975 cents/lb.
Friday's cold storage report was expected to show pork inventories last month at 547.3 million lbs., compared with 546.6 million in July and 442.9 million for the same period a year ago, according to a poll of analysts.
August beef stocks were seen at about 453 million lbs., compared with 455.7 million in July and 428.6 million during August 2011.
Cattle futures trading volume was light and prices held within a narrow range near previous levels as investors awaited the release of cattle on feed data after the close.
The report is expected to show that the number of animals entering feedlots could fall six per cent from last year to 2.111 million head, the smallest since 2008.
Spot futures posted their first weekly drop in three weeks, and the steepest weekly decline since mid-July, generally anchored by lower cash cattle sales this week at Plains feedlots.
CME spot October live cattle closed the day 0.225 cent/lb. lower at 125.525 cents, down 1.2 per cent from a week ago.
Most-active December ended at 128.475 cents, up 0.325 cent on the day.
Feeder cattle at the CME followed the lower live cattle market.
Spot September ended 0.325 cent/lb. lower at 143.8 cents while actively traded October closed at 147.225 cents, up 0.5 cent.
-- Karl Plume writes for Reuters from Chicago. Additional reporting for Reuters by Theopolis Waters.