U.S. hog futures hit limits on one-day declines Tuesday as growing concerns over pork demand pushed prices lower.
U.S. cattle futures sold off as well, facing similar pressures as consumer demand pulls back in the face of rising gas prices and weather that is unfavorable to outdoor grilling.
The lean-hog futures contract for May settled three cents, or 3.1%, lower at 92.65 cents a pound at the Chicago Mercantile Exchange, its lowest level for a front contract since late March. The June contract, which is the most actively traded, dropped three cents, or 3.1%, to 92.47 cents a pound. Hog futures can't fall more than three cents in a single day under exchange rules unless expanded limits are imposed.
"We're just not seeing the demand for the meats we should be seeing this time of year," said Steve Wagner, an analyst at Country Hedging.
Hog futures set record highs last month, but have since pulled back. Analysts said demand is softening and wholesale prices are pulling back for certain cuts such as pork bellies from which bacon is made. U.S. Department of Agriculture price data shows 14- to 16-pound bellies have fallen nearly 14% in the past three weeks.
John Otte, an editor with Farm Futures, said many consumers are likely getting hit by higher gas prices, yet are unable to shift their driving patterns. Instead, they are trimming grocery costs.
"I think it is driven predominately by demand concerns," he said of Tuesday's sell off.
Further pressure on hog futures came from contracts falling below certain key price levels, which triggered liquidation by investors that focus on chart patterns.
In cash markets, bids for hogs ranged from flat to down $1 per one hundred pounds and buying interest was reported as light. Processors are limiting their slaughter schedules this week as they face thin to negative margins and slack pork sales, according to analysts. Pork sales have slowed since wholesale prices hit near-record highs mid-April, they said.
Projections for the weekend slaughter are mostly around 10,000 to 15,000 head, well below recent weeks.
Predictions for cash hog prices Wednesday are flat to mostly weaker. The terminal markets traded flat to 50 cents lower from a $62 to $63 per a hundred pound live basis