U.S. lean hog futures were modestly higher in early trading Wednesday, supported by higher wholesale pork prices Tuesday and forecasts of seasonally smaller hog supplies for the spring and early summer.
April, the front month futures contract for lean hogs futures at the Chicago Mercantile Exchange, hit a seven-week high in electronic trading early on and was recently up 0.50 cent, or 0.5% at 94.20 cents a pound. June hog futures, the most active contract, was up 0.10 cent, or 0.1%, at $1.0335 a pound.
The U.S. Department of Agriculture reported the pork carcass composite value Tuesday afternoon up $1.14 a hundred pounds at $95.44, highest since Aug. 24, 2010 when the all-time high was set at $96.74. Growth in world demand for pork, reduced hog supplies and surging feed costs are pushing wholesale prices higher. Exports are strong and taking more of the production.
For lean hog futures to move up through last week's tops to new all-time highs, the market may need more strength in the overall meat complex, said Ken Jolliffe, analyst with BIS Commodities in Cedar Rapids, Iowa. There was some pullback in recent sessions on liquidation, or exiting of long positions, and profit taking, he said.
Some traders are concerned that consumers may purchase less beef and pork as prices continue to rise at the supermarkets to keep up with gains in wholesale prices. If demand slows significantly, hog and pork prices may not reach the high levels that the futures markets have already built in, they said. However, if export sales continue to pull more pork away from the domestic market, cash and futures prices may move even higher.
The outlook for cash hog prices Wednesday was generally flat with a few mixed bids seen likely, depending upon the variable inventory levels held by processors for this week and into early next week.
The terminal hog markets were expected to trade mostly flat.