U.S. lean hog futures prices closed mostly lower Wednesday, pressured by profit-taking and premiums held over current cash quotes.
April, the front month and most-actively traded hog contract at the Chicago Mercantile Exchange, closed down 1.30 cents, or 1.4%, at 90.97 cents a pound. April hit nearly a four-week low as some traders exited long positions.
June, the next-most actively traded contract, fell 0.70 cent, or nearly 0.7%, to close at $1.0170 a pound.
Analysts and brokers said other factors weighed on hog futures as well, including uncertainty about demand and larger-than-expected total pork stocks held in the nation's freezers as of the end of January. The U.S. Department of Agriculture reported Jan. 31 pork stocks at nearly 541 million pounds, an increase of 65.1 million pounds from the previous month and more than 30 million pounds above the average of analysts' pre-report estimates.
Some traders viewed the increase in pork stocks as a reaction among industry participants to the wide premiums held in the summer contracts. They said the significantly higher prices represented by the summer hog contracts, compared with current cash and the nearby futures contracts, may have encouraged meat processors, exporters, food-service operations and retailers to store certain products for use later in the year as a hedge to higher prices.
Early in Wednesday's session, corn prices were sharply lower, which also weighed on lean hog futures, said Don Roose, analyst with U.S. Commodities. Lower corn prices mean cheaper feed costs for hog producers, which could encourage them to maintain or expand their breeding herds. Corn prices later rallied to post daily gains of 11 cents to more than 12 cents a bushel. The rebound in corn prices helped to reverse the sentiments in the distant October and later hog contracts, which closed modestly higher.
Cash prices were mostly flat, with a few plants quoting firmer bids for loads to arrive later this week or early next week, said livestock dealers and market managers. Seasonally tighter supplies of slaughter-ready hogs is expected to contribute to improved buying interest among processors in the coming weeks.