Hog futures bounded to two-month peaks and set several contract highs at the Chicago Mercantile Exchante, according to a Reuters report.  Pork prices have shot higher this year due to smaller supplies which in turn has forced pork plants to cut production.

The smaller pork supply has been known for some time, but the strength in the pork market has surprised even the more bullish traders.

“Rising cash prices have finally given a boost to hog futures prices,” says Rich Pottorff, Doane market analyst. “In addition, strength in crop prices has pulled speculative funds back into commodity markets in general.”

Pottorff believes the cash and futures prices will hold up for the next several weeks, but prices may be near the top. “I doubt if hog prices in December will be $75 as indicated by the futures contract.”

USDA reported the average pork price, or cutout, was $89.35 per hundredweight, up $2.49 from Tuesday and the highest since May 18. Talk among traders on Thursday had the cutout peaking at about $90.

Much of the cutout's gain was from pork bellies, which were up $9.75 on average Wednesday at $133.21. USDA reported some pork belly sales Wednesday up to $135 which it said was a record.

"We have fast food places all over the country using bacon," said one trader. Bacon demand is particularly strong in the summer as consumers make bacon-lettuce-tomato sandwiches.

Source: Reuters, Doane