CHICAGO (Dow Jones)--U.S. lean hog futures continued to climb Wednesday on seasonal strength in cash prices for slaughter-ready animals.
October hog futures rose 0.32 cent, or 0.4%, to 89.40 cents a pound in trading at the Chicago Mercantile Exchange. CME December hogs rose 0.92 cent, or 1.1%, to 83.90 cents a pound.
The pork complex is currently riding a two-week-long rally as cash prices have risen on a seasonal surge in demand. Meat packers are expected to increase their slaughter rates about 17% between August and November as they fill orders for the fall grilling season and October's National Pork Month promotions.
Cash prices for hogs typically stabilize in September before falling again in October and November as a seasonal climb in supplies eventually outweighs demand. Hog producers turn out new animals on a yearly cycle that's closely tied to weather, since hogs are sensitive to high heat and very cold temperatures.
"After this week, cash and cutout typically come on harder times," said Bob Vande Vorde, analyst with Mast Group, an affiliate of Intl FCStone. "Cutout" refers to wholesale prices for pork. The USDA's pork carcass composite value, a measure of wholesale prices, on Tuesday fell five cents, to $95.84 a hundred pounds.
Prices have risen seasonally more quickly than some traders expected in late August. Market participants almost unanimously say the recent enduring stability of prices is due in part to purchases from China, which is grappling with runaway food costs.
Cash hog prices are expected to be mostly steady today on buying interest from some processors that still need additional supplies for late this week and early next week.
Demand for the hogs remains strong despite the fact processing margins having tightened a bit in recent days. Strong export sales, along with forward sales from August, are thought to be contributing to good near-term demand for the animals, analysts said. Orders from August may have better profit margins compared with those calculated with the latest USDA wholesale pork prices, they said.
Projections for the weekend slaughter have been expanded to 160,000-165,000 head which, if on target, should put the week's total on pace to reach about 2.285 million head. That would be similar to last week's total and up approximately 3.9% from year-ago.
The terminal markets are expected to trade mostly steady to higher with tops so far seen from $58 to $65 a hundred pounds.
The latest CME two-day lean hog index, calculated using USDA market data, for Monday was up 0.59 cent, to 89.07 cents a pound.