Lean hog futures fell sharply amid concerns among traders that high wholesale pork prices may be whittling domestic demand.
May hogs fell 1.70 cents, or 1.6%, to $1.0242 a pound. June, the most active contract, were off 1.55 cents, or 1.5%, at $1.0107.
Some hog traders took profits on long positions following sharp gains the past two days that had pushed near-by May to a new contract high Thursday. Overnight selling of a broad range of commodities and a high price when compared with cash prices prompted the selling interest.
Early pressure in lean hogs was driven in part by selling among large investors following the release of a Goldman Sachs note to clients maintaining a near-term negative stance on commodities. Investors moved money out of livestock and into less risky markets, brokers said.
Wide premiums in hog futures over current cash prices also enticed traders to sell, said Don Roose, analyst with U.S. Commodities.
U.S. Department of Agriculture data for retail meat prices in March showed beef up 13% from a year ago, pork up 15% and chicken 6% higher, said Rich Nelson, director of research with Allendale Inc. The smaller increase in chicken could lead consumers to purchase more of that and less beef and pork, he said.
The U.S. Department of Agriculture's pork carcass composite value Thursday slipped $0.31 per hundred pounds to $96.00 from nearly an eight-month high hit Wednesday. The all-time high of $96.74 was set Aug. 24, 2010.
Combined with other factors, retailers' balking on paying higher prices for pork, "pulled the rug out from under the market," said Tom Cawthorne, vice president and hog futures trader for R.J. O'Brien.
Despite the day's declines, market support is expected from growing world demand and tightened global supplies.
But as developing nations become increasingly prosperous, demand for meat is going to increase, not decrease, said Dan Norcini, a private trader.
"Hog herds are not expanding fast enough to meet this new source of demand, and that is going to keep hog prices moving higher over the next few years," he said.
Cash hog prices Friday were expected to be generally flat with some bids possibly weaker amid speculation that processors may reduce slaughter schedules next week. In addition, two plants are scheduled to be closed on Good Friday and nine or 10 are expected to be closed on April 25 in observance of the Easter holiday.
The terminal markets traded flat at $64 on a live basis.