U.S. lean hog futures were modestly higher in early trading Friday on support from firmer cash market expectations for next week and ongoing strength in pork exports.
April lean hogs futures at the Chicago Mercantile Exchange last traded up 0.30 cent, or 0.3% at 93.05 cents a pound. April will expire next Thursday. June hog futures, the most active contract, was up 0.50 cent, nearly 0.6%, at $1.0065 a pound.
Also contributing to early support was profit taking by some traders holding short positions following steep declines in summer contracts the past two to three days.
Some traders may feel the market had pulled back enough in recent sessions to get it in line with their cash expectations, so they may buy back short positions, said Rich Nelson, director of research with Allendale Inc. There may also be some speculative buying by other traders.
Support in the cash markets into next week is seen from seasonally tighter supplies of slaughter-ready hogs and indications that average weights are beginning to decline, leaving producers more up to date on marketings. There is also speculation that wholesale prices for pork cuts used for grilling, such as chops, butt steaks and spareribs, will trend higher soon on improved demand later in the month and into May.
In its latest monthly World Agricultural Supply and Demand Estimates released early Friday, the U.S. Department of Agriculture left unchanged its projection of nearly 11% growth in 2011 pork exports and reduced slightly its figure for pork imports. The government cited weakness in the U.S. dollar as a factor in reducing its 2011 meat import estimates modestly from the previous month.
The USDA reported its pork carcass composite value Thursday down $0.31 a hundred pounds to $94.28, primarily on weakness in ham prices. For the week to date, pork prices overall are nearly flat. Processing margins have tightened this week, compared with earlier in the year. Pork prices have temporarily stalled while cash hog prices ramped up late last week then moved higher again in the eastern corn belt this week as supplies tightened further.
This week's hog slaughter is projected to be around 2.080 million head, the smallest figure for a non-holiday week since mid-August, reflecting the seasonally reduction in supplies.
Early calls for cash prices Friday were mostly flat but some higher quotes are possible for loads to be delivered the middle of next week or later. The terminal hog markets were expected to trade mostly flat.