U.S. lean hog futures prices bounced back Friday from two days of steep losses on profit taking of short positions ahead of the weekend and spillover support from strong gains in cattle and grains contracts.
April, the front-month and most-actively traded hog contract at the Chicago Mercantile Exchange, closed up 0.70 cent, or 0.8%, at 90.20 cents a pound. For the week, the April contract fell 2.07 cents, or 2.2%. June closed 0.92 cent, or 0.9%, higher at $1.0145 a pound.
Earlier in the week, there was an outflow of investor money from livestock and other agricultural commodities and into rising energy futures and energy-related stocks, but some of that money came back into the agricultural sectors to end the week, analysts said.
The movement of investor money "is much more rapid now than it was in the past and can swing the tide of direction" in the commodities markets, said Don Roose, analyst with U.S. Commodities. In addition, the bigger perspective supportive factors for hog futures and cash prices include wide processing margins at pork plants and improving seasonal demand. Wide margins encourage processors to maintain their slaughter schedules, so they need to keep buying hogs, he said. "We're also getting into some seasonal demand factors such as hams needed for the Easter holiday," he said.
Expectations for cash hog prices to move gradually higher in the weeks ahead provided additional support. Wide premiums to current cash prices capped gains in some months, including April, preventing further retracement of Thursday's declines.
Near-limit gains in corn prices helped bolster the deferred hog contracts August through April 2012, and those months did erase Thursday's losses. Higher corn and soy-meal prices push up feed costs for livestock producers, keeping a lid on herd expansion.