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CME bellies close up sharply, hogs pare gains

CHICAGO: CME pork belly futures remained strong and finished sharply higher after posting new contract highs across the board. Hog futures set new highs in June and July but slipped late as profit taking developed, traders said.

Pork bellies reached their highest level since August 1987 and set new highs of 74.625 in May, 73.575 in July and 70.400 cents per lb in August. Prices finished 1.900 to 1.500 cents higher with May up 1.700 at 74.375 cents.

Continued demand in bellies reflected last Friday's bullish hogs and pigs report and tight storage stocks.

"The continued tight supplies, good slicer demand, light storage stocks and narrow basis were all supportive to belly futures," said Dale Benson, livestock analyst for Dean Witter.

Tuesday's out-of-town report was considered bullish because the net in-movement of 51,000 lbs was well under the low end of expectations and compared with a net in-movement last year of 1.506 million lbs, traders said.

Both the hogs and pigs and out-of-town reports show that futures will have to widen their premium over cash to stimulate any type of storing interest, they said.

Hogs ran up to new contract highs in June of 56.850 cents per lb and July 55.375 cents early when initial profit taking lacked followthrough and fresh demand developed on firmer cash market projections. But prices slipped from best levels late as renewed profit taking was cited, traders said.

Demand on the early run up in futures reflected reports of increased packer demand for cash hogs. Price projections for Thursday's live markets turned mostly steady to higher from early calls of steady at best. Hog runs tightened and packers are being forced to pay up for slaughter supplies, especially if they want enough hogs for Saturday's kill, they said.

Fund buying and rolling of short April positions into June and July ahead of first notice day added to strength in summer months and buy stops were touched off above old lows. Prices then drifted back late as profit taking again developed with futures at highest levels since July 1991, traders added.

In hog options, Lind Waldock sold April 60 calls late. Commission houses sold June calls on the early rally in futures, pit sources said.

Hog futures closed 0.100 to 0.800 cent higher with June up 0.200 at 56.250 cents.-Reuter