CHICAGO (Dow Jones)--U.S. lean hog futures rose Wednesday as cash hog prices continued to ride a strong recovery from a sharp seasonal decline earlier this month.
October hog contracts rose 1 cent, or 1.2%, to 88.15 cents a pound in trading at the Chicago Mercantile Exchange. December hogs rose 0.67 cent, or 0.8%, to 83.50 cents a pound.
Lean hog futures for October have rallied more than 3 cents in the last week as cash prices for slaughter-ready hogs have rebounded sharply after falling faster than expected in late August and early September.
Only a few weeks ago, supplies rose sharply on a seasonal basis as producers moved up plans to sell increasing supplies of animals. Now, meat packers are meeting higher demand from retailers, who are stocking meat cases for the fall grilling season.
Investors are trying to size up the eventual fundamentals for pork later this fall and into winter after prices hit records in July and August. One factor will be the needs of China, which continues to grapple with high pork prices. China has issued tepid signals that it might import more pork later this year.
"I don't think we have a good handle on how strong Chinese buying will be," Dan Vaught, president of Vaught Futures Insights, said. But some investors are betting the giant Asian nation will again move to import more pork, he said. "Fund buying in October futures is implying that Chinese buying is going to be quite strong," he said.
Cash hog prices are expected to range from steady to as much as $1 a hundredweight higher on buying interest as some plants need more hogs to complete their slaughter schedules for this weekend and to add to inventories for next week.
Profitable processing margins, continued strong world demand for pork and available supplies are encouraging pork processors to boost slaughters.
Predictions for Saturday's slaughter are mostly from 150,000 to 160,000 head, and the week's total is projected to be around 2.275 million, up about 4.8% from year-ago.
The latest Dow Jones Newswires pork packer margin index was plus $12.36 per head, compared with plus $14.32 the previous day.
Average hog weights in Iowa and southern Minnesota last week climbed 3.7 pounds from the previous week to 267.2 pounds per head. Increased feed consumption and weight gains in recent weeks due to cooler temperatures have boosted the average. Also, a backup in supplies ahead of the Labor Day holiday likely contributed to the heavier weights. Livestock dealers said this week's larger slaughter, projected to be 100,000 head or more above a year ago, should allow producers to become up to date on shipments.
The USDA's pork carcass composite value Tuesday rose 56 cents to $94.84 a hundred pounds.
The terminal markets are expected to trade mostly steady to firm with tops seen from $52 to $61.50 a hundred pounds.
The latest CME two-day lean hog index, calculated using USDA market data, for Monday was down 0.33 cent to 86.10 cents a pound.