Late-week profit taking and hedge selling following the recent sharp gains weighed on lean hog futures contracts early in Friday's session following recent sharp gains to new all-time highs.
U.S. hog futures hit new highs in most contracts in electronic trading early Friday on support from soaring corn prices before easing back.
April, the front month futures contract for lean hogs futures at the Chicago Mercantile Exchange, slipped from a 6 1/2-week high hit earlier and was last down 0.32 cent, or 0.3%, at 93.40 cents a pound. June hog futures, the most active contract, was off 0.82 cent, or 0.8%, at 1.0305 after making a new all-time high in overnight trading.
Higher corn prices are supportive for lean hog futures overall, even though some traders are taking profits before the weekend, said Rich Nelson, director of research with Allendale Inc. Further strength expected in the cash hog and wholesale pork markets also underpin the market and should limit losses.
Thursday's U.S. Department of Agriculture grains stocks data as of March 1 showing a 15.2% decline in corn stocks from year-ago sent corn futures up the 30-cent per bushel daily limit, and the gains were extended in overnight trading. Expectations of record high average corn prices for 2011 were reinforced by the data and market reaction, analysts said. For hog producers, further strength in corn prices means higher feed costs and most likely smaller profits unless hog prices rally in tandem with corn.
The number of hogs to be available for slaughter during the next six to seven months has already determined as the pigs have already been born. Supplies for the following three to four months will come from gestating sows due to farrow, or give birth, now through mid July.
Hog producers may react to the surging corn prices, however, by discarding any plans they have had about expanding their herds. Some might further reduce the number of females in their breeding herds.
In the cash markets, processor bids are expected to range from flat to possibly as much as $1.50 per hundredweight higher as several plants seek additional loads to arrive next week. Supplies of slaughter-ready animals have tightened in recent weeks but the plants were able to find enough without boosting prices significantly until this week, said livestock dealers and analysts.
USDA's national weighted average hog price reported Thursday drew near the all-time high of $87.41 hit Aug. 8, 2008. Wholesale pork prices climbed $0.61 to $95.39, a fresh seven-month high.
The terminal hog markets were expected to trade mostly flat to higher.