U.S. lean hog futures were up sharply early in Wednesday's session as traders viewed Tuesday's steep price break as a buying opportunity with world demand for pork seen remaining strong.
April lean hogs last traded up 0.25 cent, or 0.3% at 93.70 cents a pound. June hog futures, the most active contract, was last up 2.10 cents, or 2.1%, at $1.0145 a pound, reversing from Tuesday's 3 1/2-week low.
Expectations for the cash hog and wholesale pork markets to trend upward through the balance of spring and into early summer also contributed to the rally, analysts and brokers said.
The U.S. Department of Agriculture reported its pork carcass composite value Tuesday up $1.44 per hundred pounds at $96.03, nearly an eight-month high and ever closer to the all-time high of $96.74 set on Aug. 24, 2010.
Supplies of slaughter-ready hogs are seen undergoing a seasonal reduction, which could cause processors to bid more aggressively for the hogs that are available. Packers do not want to cut back too much on their slaughter operations because per-head processing costs rise when they do, according to analysts and livestock dealers. Processors also do not want to risk losing any of their market share to competitors.
Hog futures prices have tended to undergo a two- to three-day sell-off about once a month as some take profits or exit positions, but these pullbacks often bring in new buying interest, said Ken Jolliffe, analyst with BIS Commodities in Cedar Rapids Iowa.
Growth in world demand has mainly come from improved economies in the developing nations. As incomes rise among the people there, they are willing to spend more for food and want more meat in their diets. While per-capita meat consumption in the developing nations remains comparatively low, it is rising and the large populations in those countries represent continued growth in export sales, analysts said.
Cash prices Wednesday were expected to be generally flat as most plants have adequate supplies for this week but will be looking for more loads to add to their inventories for next week, livestock dealers said.
The terminal markets were expected to trade mostly flat to possibly higher at some locations. The Peoria, Ill., terminal market reported a $1 higher market. Top prices are expected to range from $63 to $65 on a live basis.