U.S. lean hog futures were higher in most months in early trading Thursday as tightening supplies and expectations for cash prices to trend higher in the weeks ahead provide support.
The supply and cash market views counteracted earlier caution about the impact of federal budget cuts on the economic recovery. In addition, expected spillover pressure from other commodity sectors dissipated when crude oil and cattle prices rallied, analysts and brokers said.
April lean hogs at the Chicago Mercantile Exchange were up 0.05 cent at 94.00 cents a pound. April will expire at 1 p.m. EDT (1700 GMT). June hog futures, the most active contract, was last up 0.65 cent, or 0.6%, at $1.0210 a pound.
May futures hit a new contract high in electronic trading and hold a premium to June through August, which indicates the near-term cash market outlook remains strong, said Dennis Smith, analyst with Archer Financial Services
Expectations for the cash markets to continue a firming trend the balance of April and through May as hog supplies undergo seasonal tightening provide the main support for futures, brokers said.
The U.S. Department of Agriculture reported its pork carcass composite value Wednesday up $0.28 per hundred pounds at $96.31, drawing nearer the all-time high of $96.74 set on Aug. 24, 2010.
Pork export data for February released earlier this week showed an increase of 8% in total pork volume from a year ago and 15% in dollar sales, but were somewhat disappointing to some analysts.
Rich Nelson, director of research at Allendale Inc., said February exports were below his expectations. Sales to South Korea were up significantly, as had been expected due to the severe cases of foot-and-mouth disease there. But sales volume to some of the other leading international customers slipped a bit from year-ago. This may signal a pull-back in demand due to the high prices, Nelson said.
Cash prices Thursday are expected to be mainly flat but some firmer quotes for deliveries early next week are possible due to tightening of slaughter-ready hog supplies, said livestock dealers and market managers. Demand for hogs late next week may soften as two plants are expected to be closed on Good Friday and seven or more plants will not operate on Monday, April 25 in observance of the Easter holiday.
The terminal markets were expected to trade flat to narrowly mixed. Top prices are predicted to range from $63 to $65 per hundred pounds on a live basis.