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CME update: lean hog futures rise as corn surge squeezes supply

US lean hog futures firmed on 12 January on higher cash hog prices and improving pork packer margins as soaring feed costs stoked concerns about tighter hog supplies.

13 January 2021, at 9:02am

Reuters reports that US corn futures surged more than 5 percent on 12 January after the USDA slashed its 2020 harvest estimate, with prices of key feed grain hitting their highest in 6½ 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.

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

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