CHICAGO (Dow Jones)--U.S. lean hogs futures faced a stiff sell-off Thursday after U.S. government data surprised investors and analysts with reports of growing corn and grain supplies.

July contracts for hogs fell 0.67 cent, or 0.7%, to 94.55 cents a pound in trading at the Chicago Mercantile Exchange. August contracts fell 1.42 cents, or 1.5%, to 91.75 cents a pound. October contracts fell 2.1 cents, or 2.4%, to 85.6 cents a pound.

Longer-term contracts felt the most pressure in early trading after the U.S. Department of Agriculture released data Thursday that projected planted acreage of corn at 92.3 million acres, well above expectations.

Hogs prices often move in tandem with corn prices since lower corn prices means hog producers have thinner feed costs to pass on to meat packers. Lower feed costs can also entice hog producers to increase their herd sizes, which in turn leads to a bigger eventual supply of animals for slaughter.

The USDA grains reports marked a stark reversal in forecast for hog growers, many of whom assumed corn prices would remain high through the rest of the year. Some analysts recently went so far as to forecast a looming corn shortage.

"It caught the market by surprise," said George Enloe, partner at Amarillo Brokerage.

July corn contracts fell 72 cents, or 10.3%, to $6.26 a bushel. September contracts fell their full one-day limit of 30 cents, dropping 4.4% to $6.48 a bushel.

CASH MARKETS

Cash hog bids Thursday are expected to be mostly steady. Buying interest could be light overall ahead of the Independence Day holiday weekend but a few plants may seek additional loads for delivery late next week, said livestock dealers and market managers.

A processor in the western corn belt paid $1.06 a pound base price late Wednesday, according to USDA data. The deal, made on several loads, raised sharply the weighted average price for the region and in the government's prior-day purchased national market reports released early today compared with prices reported Wednesday afternoon.

Few additional loads are expected to be offered for sale the balance of this week because producers are current, or up to date, on shipments, dealers said.

The U. S. Department of Agriculture's carcass composite value, a measure of wholesale prices, Wednesday fell 33 cents to $97.04 a hundred pounds.

The latest Dow Jones Newswires pork packer margin index was minus $11.42 per head, compared with minus $8.88 the previous day.

Analysts estimate Thursday's slaughter to be around 400,000 head.

The terminal markets were expected to trade mostly steady with top prices seen from $66 to $69 hundred pounds on a live basis.

The latest CME two-day lean hog index, calculated using USDA market data, for Tuesday was up 0.16 cent to $1.0251 a pound.