Signs of continuing firmness in pork demand were supportive to lean hog contracts Thursday. In addition, an anticipated reduction in the hog supply during the second half of 2011 added support to the June contract.

Producers’ farrowing intentions as reported in the December 2010 USDA Hogs and Pigs Report released last week were slightly less than pre-report estimates, increasing the chances for tightness in hog supply later this year.

“Lean hog futures rose sharply on Thursday as the futures market was buoyed by reports of firm wholesale pork prices and optimism about domestic and export demand going into the spring,” report Steve Meyer and Len Steiner in the CME Daily Livestock Report.

The nearby February contract closed at $79.775, a 175 points gain from the previous close. The June contract closed at $94.025, a new contract high.

“Particularly interesting are hog futures prices for the second half of the year,” say Meyer and Steiner. “The market reflects the expectation that producers have already pressed hard on the brakes.”

However, increased slaughter weights and a chance that some producers will accelerate their hog production may put a damper on prices. “As we go into the second quarter, there may not be as much pent up demand and if there is a supply surprise then prices could struggle,” Meyer and Steiner add.

Source: PORK magazine, CME Daily Livestock Report