CHICAGO (Dow Jones)--U.S. lean hog futures fell Monday as markets declined broadly and traders were cautious about strength of cash hog prices.
October hog contracts fell 0.4 cent, or 0.5%, to 87.35 cents a pound in trading at the Chicago Mercantile Exchange. CME December hogs traded lower by 1.325 cents, or 1.4%, to 82.725 cents a pound.
The pork complex came under pressure as stock and commodities markets sold off broadly, in part tied to widening concerns that problems with Greece's economy could spread throughout Europe. The Dow Jones Industrial Average was recently down 213 points to 11296.
Traders are also very cautious about the direction of cash prices for hogs after they've stabilized in recent weeks but are nonetheless poised for a seasonal decline. Cash prices and futures prices converge as a contract nears expiration.
Prices usually fall in late September or October as hog producers climb toward their late-year peak in production. Hog producers typically boost production sharply starting in late summer as cooler weather makes for more efficient hog-raising conditions.
Investors are especially cautious since prices dropped at an alarming rate in August and early September as hog producers rushed to sell in front of falling prices. Market participants are also sizing up demand from China, which is widely said to be buying more pork to offset highly inflated food prices there. The Asian nation has the world's largest appetite for pork, so any broad purchases by China can quickly lead to rising prices. Traders will therefore be carefully tracking wholesale pork prices for signs of weakness, which could suggest a pullback in export demand.
Cash hog prices are expected mostly steady to as much as 50 cents to $1 higher in some regions. Processors haven't finished buying supplies for their weeks' slaughter schedules, although demand could be lighter than last week after packers processed a heavy load on Saturday.
Monday's slaughter is likely to be about 425,000 head. The latest Dow Jones Newswires pork packer margin index was plus $8.60 per head, compared with plus $9.44 the previous day.
The USDA's pork carcass composite value Friday rose 15 cents to $95.37 a hundred pounds.
The terminal markets are expected to trade mostly steady to firm with tops seen from $53 to $64 a hundred pounds.
The latest CME two-day lean hog index, calculated using USDA market data, for Thursday was up 0.76 cent to 87.69 cents a pound.