U.S. lean hogs Tuesday extended their recent declines as traders continued to sell against the premiums carried in futures prices over current cash markets and on expectations for sluggish pork sales to carry over from February through early March.
April, the front month and most-actively traded hog contract at the Chicago Mercantile Exchange posted a five-week low and closed down 0.70 cent, or 0.8%, at 88.10 cents a pound. June hit a one-month low then rallied to retrace most of the earlier decline and closed off just 0.27 cent, or 0.3%, at 99.92 cents a pound. It was the first time for June to close below $1 a pound since Jan. 28.
Some investors exited long positions in April when the market fell below key support levels such as the 40-day moving average. The slide also triggered some pre-arranged sell orders, pushing prices in April down to its session low.
Additional rolling of long positions out of April and into June also contributed to the decline in the near-by contract, brokers said.
Expectations among some traders for wholesale pork sales to remain sluggish and prices to be flat to weak over the next few days also weighed on the nearby contracts, a broker said.
"The market was searching for direction" to begin the session, and traders were waiting to see if investor money would again flow into the agricultural commodities, said Ken Jolliffe, analyst with BIS Commodities. It didn't happen and prices fell.
There was some short-position profit taking, or buying back short positions previously sold, that helped pull prices off their session lows, a broker said. "Some traders also felt that enough of the premiums [over cash] had been removed in the slide of the past five days," he said. Expectations for cash hog prices and wholesale pork markets to move up into the spring and summer months also provided underlying support.
Near-term cash prices, however, may remain about flat or possibly decline slightly since most of the pork processing plants have the majority of their needs for this week already booked and are scheduling loads for arrival next week, according to livestock dealers. The terminal markets traded flat to down $1 per hundredweight in light buying interest as well.