Hog prices rose to all-time highs in U.S. cash markets today, and analysts expect further strength as summer nears amid shrinking animal inventories and robust pork demand.
On a carcass basis, hogs averaged $91.08 per hundred pounds nationwide April 11, up 92 cents from the end of last week, according to U.S. Department of Agriculture data. That price tops the previous record of $90.43 set April 7.
Also today, corn futures in Chicago hit all-time highs for fourth day in the past six, climbing as high as $7.78 ¼ a bushel in the May contract. Corn for May delivery rose 8 cents to $7.76, a record settlement for a contract closest to expiration.
Cash hog prices have surged about 29 percent since the end of last year, reflecting a smaller herd that’s forced meatpackers to bid more aggressively for slaughter-ready pigs. In addition to serving improving domestic demand, U.S. meat processors are also trying to keep pace with stepped-up buying from South Korea and other top export markets.
“Demand for U.S. pork remains outstanding and I look for this to continue,” Dennis Smith, an analyst with Archer Financial Services in Chicago, said in an April 11 report.
U.S. pork exports rose 17 percent in January compared with the same month in 2010, according to USDA data. For all of 2011, the USDA forecasts pork exports to increase almost 11 percent from last year, to about 4.68 billion pounds.
Smith says he’s bullish on hog futures into summer and is advising speculator clients to trade the market from the long side, or place bets that prices will rise. For June lean hog futures, Smith’s next upside target is the equivalent of $105.10 per hundredweight, with an eventual move to $108 possible, he said.
“I'll be watching the June hogs closely this week with the intention of adding to our length,” Smith said.
In trading April 11, June lean hog futures at CME Group rose the equivalent of 52.5 cents to $101.50. On April 1, June futures hit a contract high of $104.35. The April hog contract, which expires Thursday, rose 10 cents to $93.25. CME hogs reflect carcass values.
Hog prices are also climbing because of seasonal factors, specifically a drop-off in the number of animals available for slaughter during the spring. That primarily reflects lower pig births during the winter.
“The cash market is clearly going to go significantly higher, due largely to the anticipated slowdown in hog slaughter in coming weeks,” said Dan Vaught, who runs Vaught Futures Insights in Altus, Ark.