Commodities : Pork Futures Surge Higher

Pork futures prices surged sharply higher Wednesday with many contracts gaining the limit allowed for daily trading on the Chicago Mercantile Exchange.

The largest gains in hog futures were in the deferred delivery months, reflecting data in the hogs and pigs report issued Tuesday by the Agriculture Department.

The report showed that farmers are expanding the nation’s hog supply, but not as vigorously as many observers believed.

This is particularly true for their farrowing intensions in the September to November period. The USDA survey indicated that hog producers expect to increase farrowings by 7% over the year-ago figure, but the market was expecting an 11% increase.

In addition, the current slaughter rate remains low -- about 3% below the year ago figure for June, said Tom O’Hare, an analyst in New York with Smith Barney, Harris Upham & Co.

“All this makes people say (futures) prices are too cheap,” he said. Even if there’s a 6% increase in the kill over the next month, as the USDA report suggests, it won’t be enough to bring cash prices down to the level of futures, he said.

Pork belly futures gained the 2 cents-a-pound daily limit.