Lean hog futures rise as corn surge seen squeezing supply

U.S. lean hog futures firmed on Tuesday on higher cash hog prices and improving pork packer margins and as soaring feed costs stoked concerns about tighter hog supplies.

Corn futures prices surged more than 5% on Tuesday after the U.S. Department of Agriculture (USDA) slashed its 2020 harvest estimate, with prices of the key feed grain hitting their highest in 6-1/2 years.

“Higher corn prices are expected to cap production in terms of any recovery from the herd liquidation,” said Doug Houghton, analyst at Brock Capital Management.

“Smaller hog supplies are already expected but very expensive corn is going to cause further cutbacks or lower feeding rates and lighter slaughter weights,” he said, adding that potential cutbacks were most supportive to deferred hog futures contracts.

Chicago Mercantile Exchange (CME) February lean hogs rose 0.025 cent to 68.500 cents per pound, while deferred contracts were up 0.575 to 1.200 cents.

Cash pork prices hovered near a two-month high on Tuesday, according to the USDA. <PRK-MAN-CARCS>

Meanwhile, estimated pork packer margins improved to $45.70 per head on Tuesday, up from $40.60 on Monday and $33.10 a week ago, according to livestock marketing advisory service HedgersEdge.com.

Live cattle futures ended mixed on Tuesday, with nearby contracts pressured by a weak tone to the cash market. The actively traded February contract ended 0.925 cent lower at 112.475 cents per pound.

Feeder cattle futures fell sharply on soaring corn prices, with March, the most active contract, ending down 2.925 cents at 133.975 cents per pound.