DJ Lean Hog Futures Head Lower Ahead of Supply Report, Lower Pork Prices

Kelsey Gee and Curt Thacker - DJ/ - Dec 28, 2012


--Lean hogs notch lower on uncertainty about pork supplies

--Traders are cautious ahead of the USDA quarterly hogs and pigs report

--Cash market seen flat or higher in some places


CHICAGO--U.S. lean-hog futures are trading lower Friday, weighed down in part by continued uncertainty ahead of this afternoon's quarterly government hog supply report, which some expect to be somewhat market-bearish.


February lean hogs recently lost 0.15 cent, or 0.2%, to 86.87 cents a pound at the CME. April hogs slid 0.22 cent, or 0.25%, to 90.72 cents a pound. Although prices are nearly flat, industry experts suspect they are narrowly lower on anticipation of the U.S. Department of Agriculture's quarterly hogs and pigs report, due out Friday after the market's close.


"Trading volume is light because no one wants to take a position of any magnitude with the report coming out," said John Kleist, a senior analyst with futures brokerage in Lakemoor, Ill.


Pressure is coming from expectations by some market participants that the report may indicate smaller liquidation of sows, or female hogs, than was expected during the peak of drought concerns, when the last report was released.


Three months after the end of September hogs and pigs report, as grain prices have come down slightly, some industry experts believe the outlook for much lower supplies may have been overdone and that a greater number of sows were retained, keeping supplies adequate.


Other traders insist that the report's affect on futures trading once it resumes Monday should be small. "It shouldn't go anywhere unless we get some new news," said Mr. Kleist, who does not foresee a major correction in the numbers. "It'll likely be neutral-to-negative, just like the cold storage report."


Sharply lower prices for wholesale pork are also damping hog futures' prices in the early trading session. The pork carcass value for Thursday fell $1.14 a hundredweight at $81.56.


Cash hog prices across the Midwest at week's end are predicted to be mostly steady or flat with Thursday's quotes, but a few processing plants are in need of additional supplies to fill their late-week slaughter schedules and may pay a little more money to get them, livestock dealers said. Processors will also be adding to their inventories for next week.


Supplies during the first of two holiday weeks have not been quite as abundant as had been expected, dealers said. Most producers appear to be generally current, or up to date on shipments, so they may be waiting to sell more hogs next week when demand for the animals might be more brisk as packers will be buying for a full work week.


Projections for Saturday's slaughter are mainly around 325,000 head, give or take a few thousand, which is above last week's revised estimate of 297,000 head. Early indications for Monday's slaughter are for 340,000 to nearly 350,000 head, reduced from normal as most packers will operate few hours that day to allow employees to leave early for the New Year's holiday...