U.S. hog futures traded higher Thursday on rising wholesale pork prices and an expected seasonal decline in supplies.
The lean-hog futures contract for June, the most actively traded contract, traded 0.42 cent, or 0.5%, higher, at 93.65 cents a pound, while the July contract traded 0.07 cent, or 0.1%, higher to 93.5 cents a pound at the Chicago Mercantile Exchange. The May contract rose 0.37 cent, or 0.4%, to 92.4 cents a pound in light volume ahead of expiration Friday.
Hog futures have stabilized in recent days and show signs of strengthening after a slide from record highs set last month. Concerns over demand have eased on expectations that improved weather conditions will fuel increased backyard grilling. Further support is likely to come from supermarkets buying ahead of the Memorial Day holiday.
The U.S. Department of Agriculture pork carcass composite value has climbed this week, reaching $92.36 per hundred pounds on Wednesday. The value, which is a measure of wholesale prices, is up 2.1% since Friday when it hit a two-month low.
At the same time, supplies are seen tightening on seasonal declines in slaughter-ready hogs.
"Lower pork production is starting to take affect," said Rich Nelson, director of research at Allendale Inc.
Yet he said gains in hog futures will be tempered by weakness in corn prices, which fell sharply Wednesday after the USDA released a larger-than-expected forecast for end-of-season supplies. Corn futures are lower Thursday on the Chicago Board of Trade.
Corn is used as a feed for hogs, so when prices fall, traders fear producers will expand herds as the animals become cheaper to raise. Still, corn prices remain nearly 80% above last year's level.
Cash hog markets were predicted to trade steady to firmer on buying interest from some processors for deliveries next week. Seasonally tighter supplies and gains in wholesale pork prices over the past three days are also seen supportive for the cash markets. Some plants may need more hogs to fill their pork orders for the upcoming Memorial Day holiday.
The terminal markets were expected to trade mostly steady with top prices at $61 to $62 per hundred pounds live basis.
The latest Dow Jones Newswires pork packer margin index was plus 38 cents per head, compared with plus 68 cents the previous day.
Analysts predict Thursday's hog slaughter to be around 404,000 head, equal to last week's level.
The latest CME two-day lean hog index, calculated using USDA market data, for Tuesday was 91.71 cents, down 0.06 cents.