March 30, 2009

US lean hog futures fell on Thursday (Mar 26) amid further weakness in pork prices due to falling demand and on fund selling.

Futures got off to a lower start following a sharp drop on Wednesday (Mar 25) in the pork cutout value, a composite price for various cuts of pork. Additional pressure came from pork prices weakening further on Thursday.

One of the pork products that showed a decline in prices was pork bellies, and that help push pork belly futures down the daily trading limit of US$0.03 late in the session.

Analyst John Kleist said that it would seem to indicate that the pork cutout is going to take another big hit overnight, and that this market reacts to significant moves in the cutouts on a daily basis.

Kleist also said that product weakness seem to indicate this demand got weaker than expected -- domestically and export.

USDA on Wednesday put the pork cutout value off US$2.45 at US$57.86 per cwt, a two-week low.

The outlook for reduced hog supplies ahead did lift futures the past couple of weeks.

But that put most futures contracts at a large premium to the CME Lean Hog index - which is used to determine the price for cash-settled deliveries - and traders took some of that premium out on Thursday.

Analyst estimates on Friday's quarterly USDA Hogs and Pigs report for all hogs on US farms as of March 1 averaged 97 percent of a year ago in a range of 96.3 to 98.5 percent.

The number of hogs kept for breeding averaged 97.8 percent in a range of 97 to 98.5 percent and the number of hogs kept for market averaged 96.9 percent in a range of 96.1 to 98.6 percent.