Hog futures closed at a record high on Wednesday fueled by higher pork prices and bullish export news.  A recent report that South Korea waived tariffs on imported chilled pork provided futures with added upward momentum.

Wholesale pork prices have hit record highs for six straight days bringing hog futures higher with them. Strong demand from South Korea as well as China may fuel a new record for U.S. pork exports in 2011. A record $5 billion in U.S. pork export sales is a possibility for the current year, according to Erin Daley Borror, U.S. Meat Export Federation economist.

The historically high hog prices are shielding producers’ margins at a critical time as corn prices rose to over $7 per bushel this week on worries that the heat wave parked over much of the Midwest will reduce the harvest.

The August hog futures contract on Wednesday closed at $104.625 per hundredweight, the highest ever for a lead contract. The benchmark Iowa/Minnesota cash hog price increased 5.6 percent in the last week, according to a Reuters report.

“This has allowed packers to continue to bid up the price of hogs coming to market with hog carcass values now also at record high levels,” according to CME Daily Livestock Report authors Steve Meyer and Len Steiner.

Traders will be watching pork demand levels closely for the remainder of the week to judge if the record high prices are sustainable. “Anecdotal evidence from industry contacts indicates that pork shipments to China remain very strong and could be sustained at least through the end of August,” according to the CME report. “After that, much will depend on pork prices in China and the ability of Chinese producers to ramp up production.”

Another factor propelling prices is a sharp reduction in hog slaughter weights. Average hog carcass weights have fallen about 7 pounds since early July to around 198 pounds due to high temperatures across the nation’s midsection. Average hog weights in Iowa/southern Minnesota recently were the lightest in nearly three years.

If temperatures moderate, carcass weights will begin to edge up again and traders will likely be watching the thermometer as well as export demand levels.

Source: CME Daily Livestock Report, Reuters