U.S. hog futures were lower at the outset of trading Tuesday, pressured by uncertainty about pork demand holding up in the face of rising prices and further selling to draw down more of the wide premiums held in futures over cash.
April lean hog futures at the Chicago Mercantile Exchange recently traded down 0.70 cent, or 0.8%, at 88.10 cents a pound. April hit nearly a five-week low. June, the second most-active month, was off 0.60 cent, or 0.6%, at 99.60 cents a pound and hit a 3 1/2-week low.
Expectations for cash prices to hold near flat did not provide enough support to keep futures from slipping further because of the premiums built into futures during the recent sharp rallies, brokers said.
"Traders are waiting to see if there is any more money flow into commodities at the first of the month," said Ken Jolliffe, analyst with BIS Commodities in Cedar Rapids, IA. If that does not occur early in the day, the market may drift down, he said.
Some traders are also concerned about near-term topping indications in wholesale pork prices after the pork carcass composite value eased a bit on Monday. Speculation that domestic sales of pork for early March retail advertising were not as strong as had been expected also contributed to early declines in futures, a broker said.
In the cash markets, many of the pork processing plants appear to have sufficient supplies for the majority of the week so the buyers are bidding cautiously but mostly flat with Monday's quotes. A few weaker bids may be seen as well since some buyers may test the market to see if they can cheapen the cost of hogs to be slaughtered later in the week. The terminal markets are also called mostly flat amid limited buying interest early in the week.
Most of the predictions for the direction cash prices will take throughout the week are generally flat since the plants have profitable processing margins and expectations for the week's slaughter are mostly around 2.115 million to 2.125 million, up slightly from last week's estimate of 2.108 million.