Lean hog futures fell Friday as investors took profits in the wake of a week-long rally and participants were suspicious that prices for hogs and pork could fall again soon.
October hog futures fell 1.65 cents, or 1.9%, to 87.35 cents a pound in trading at the Chicago Mercantile Exchange. CME December hog futures fell 1.67 cents, or 2%, to 82.72 cents a pound.
Traders booked some profits after hog futures and cash prices rallied substantially during the last two weeks. After a sharp seasonal rise in supplies in August and September outstripped demand, meat packers have more recently been quickly expanding slaughter schedules to take advantage of high pork prices and healthy profit margins.
Due in part to that fast-expanding demand from meat packers, many investors now assume that China has moved to import more pork as the massive Asian country struggles with runaway food prices, especially for pork. Orders to China have the potential to happen quickly since the Chinese often order pork in the form of lightly-processed carcasses, rather than butchered meat cuts, one hog producer said.
Traders also sold off futures as some took note of very tepid signs of weakness in the cash markets. Although market-ready hogs sold to cash buyers at mostly steady prices on Friday, including some loads at higher prices, a few owners sold animals at sharply lower prices, according to a USDA report. Meanwhile, brokers said, some packers are already agreeing to pay higher prices next week.
Investors are jittery about cash signals at the moment because historically hog prices rally temporarily in September before falling again on further rising supplies in October and November. Hog producers boost production starting in late summer as cooler temperatures make for more efficient hog-raising conditions.
Projections for Saturday's slaughter have risen to 168,000, and the week's total is expected to be around 2.275 million head, or nearly 5% above a year ago.
The latest Dow Jones Newswires pork packer margin index was plus $9.44 per head, compared with plus $11.34 the previous day.