Questions about the size of premiums already built into lean hog futures seemed to cause mixed trading in the CME pit Monday, with the February contract rising slightly, while the highly priced June contract slipped. Mixed country prices and relatively flat pork cutout values may also have given traders little guidance about short-term market direction. Still, there are solid fundamental reasons for thinking the hog and pork complex will rally over the next 4-5 weeks, which probably explains much of the modest increase posted in Tuesday morning activity. February hogs had advanced 0.27 cents to 86.57 cents/pound in pre-dawn trading and June climbed 0.20 cents to 98.75.
Ideas that the USDA will modestly reduce its estimate for the 2012 U.S. cotton crop seemed to boost white fiber prices at the ICE Monday. Wire service reports also indicate the industry is anticipating 2013 cotton plantings to fall to extremely low levels, thereby substantially limiting production prospects next fall. Those considerations probably powered the early week rally. However, futures fell rather sharply in Monday night activity, possibly due to the fact that nearby March has not been able to close above its 10-day moving average since it broke down on December 28. Concurrent soybean losses may have weighed upon prices as well. March cotton fell 0.67 cents to 75.04 cents/pound in early morning action, while December dove 0.70 cents to 78.71 cents/pound.