Lean hog futures prices Wednesday are rebounding as bargain buyers step in after a four-day, 6.9% drop.
The April contract recently traded at 85.80 cents a pound on the Chicago Mercantile Exchange electronic market, up 0.92c, or 1.10%. May was up 0.95c, or 1.01%, at 95.15c.
Over the previous four days, the lead April contract fell to a two-month low as the market joined a general sell-off of commodities and stocks. Many brokers said they were looking for a chance to step in and do some bargain buying.
"Although the Japan situation [with its extensive damage from Friday's earthquake, tsunami and nuclear reactor crisis] may worsen, the trade feels it has priced it in," said Rich Nelson, research director for Allendale Inc. Therefore, they are stepping in to pick off some bargains now.
Many analysts and brokers said over the last few days that the markets likely would overreact to world events and the general sell-off of commodity and stock markets. And Nelson said this likely was the case with lean hogs.
Part of the sell-off in hogs was linked to ideas that pork exports to Japan would be cut significantly, Nelson said. However, exports may be off only 15% for the next two months, which equates to a three- to four-cent decline in lean hog futures. However, the June contract fell almost seven cents, indicating the effect of panic selling over the last few days.
The flight to safety seen over the last few days also may be fading. The Nikkei stock index was up overnight on bargain hunting, and the market discounted a downgrade of Portugal's credit rating by Moody's, saying it was just catching up with other downgrades.
Traders began to feel better about economic growth after the U.S. Federal Reserve made it clear it was keeping interest rates low to spur growth, analysts said.
Slaughter rates for the week through Tuesday were estimated at 828,000 head, compared with 837,000 a week earlier and 848,000 a year earlier, the U.S. Department of Agriculture said.
In the cash market, bids from packer buyers were expected to be nearly flat as the number coming to market just about matches the slaughter needs of packers.
Early projections for weekend slaughter range from 70,000 to 75,000 head, only slightly below last week.
Terminal hog markets were expected to be mostly flat to slightly lower with highs expected from $55 to $56 on a live basis.