U.S. lean hog futures slid further Monday as traders grew wary of wide premiums held in board prices over current cash quotes, along with cautious views about near-term pork demand.
The April front-month and most actively traded hog contract at the Chicago Mercantile Exchange hit a fresh one-month low and closed down 1.40 cents, or 1.6%, at 88.80 cents a pound. June closed 1.25 cents, or 1.2%, lower at $1.0020 a pound and is the only contract remaining above $1.
Long-position profit-taking and rolling of long positions out of the nearby contract and into June or July contributed to the decline in April hogs, brokers and analysts said.
Some accounts may have exited a portion of their nearby hog positions, selling those contracts on concerns that broiler chicken could take some retail business away from pork, said Rich Nelson, director of research at Allendale Inc. He said large broiler output so far in 2011 and low chicken prices overall could weigh on pork sales as consumers seek more bargains. Wholesale pork prices are up nearly 30% from a year ago while chicken prices are down from 2010, giving chicken a price advantage that could attract more interest from food retailers for the near term.
Other analysts and brokers expressed concerns that with wholesale prices for pork already up nearly 30% from 2010 and further gains needed to reach the levels represented by the summer hog contracts, retailers and consumers alike may resist paying the higher prices.
Buying interest among pork processors in the cash hog markets Monday was not as aggressive as some analysts and livestock dealers had expected earlier in the day. Indications of limited demand for hogs from the processing plants also caused lean hog futures traders to be cautious, analysts said.