U.S. lean hog futures rose Thursday as wholesale pork prices and rising production at meat packers points to improving pork demand.

October hog contracts rose 0.65 cent, or 0.7%, to 89.10 cents a pound in trading at the Chicago Mercantile Exchange. CME December hogs traded higher by 0.7 cent, or 0.8%, to 84.55 cents a pound.

Prices for October futures, which expire soonest, continue to point to rising demand for pork over the coming four weeks. After futures traded at a steep discount to cash prices for weeks--accurately predicting a steep, temporary decline--hog futures now trade at a premium to cash prices of more than 2 cents a pound. The latest CME two-day lean hog index, at which contracts settle against, was up 0.12 cent to 86.22 cents a pound on Tuesday. That figure represents a calculation of USDA data.

"Packers have been paying more for hogs recently as demand in export markets appears to be in relatively good shape," said Steve Meyer and Len Steiner, authors of the CME Group's Daily Livestock Review.

This week's total slaughter rate is expected to be near 2.275 million, about 4.8% above the year-ago figure.

There has been growing chatter in recent days--so far unsubstantiated--that demand for hogs has risen sharply over the last two weeks because a meat packer is filling orders for China. The giant Asian country continues to grapple with fast-rising pork prices as consumers there gain spending power and buy higher-priced foods.

Although China has vowed to increase its domestic pork production, the country is expected to rely on imports for some years until it can overhaul its fragmented pork industry, which remains vulnerable to infectious diseases as well as inconsistent meat quality and safety.

CASH MARKETS

Cash hog prices are expected steady to higher on continued buying interest by some plants looking to cover their needs for weekend operations. Several plants are also seeking additional supplies to add to their inventories for next week's slaughter.

This week's large slaughter will help keep producers current, or up to date, on shipments and may result in a downtick in average weights following a sharp gain in the Iowa/southern Minnesota average last week.

Predictions for Saturday's slaughter are mostly from 155,000 to 160,000 head.

The latest Dow Jones Newswires pork packer margin index was plus $11.34 per head, compared with plus $12.36 the previous day.

The USDA's pork carcass composite value Wednesday rose 88 cents to $95.72 a hundred pounds.

The terminal markets are expected to trade mostly steady to possibly firm at some locations with tops seen from $53 to $62 a hundred pounds.