Hog futures jumped to a 13-year high as wholesale pork surged, signaling demand for the meat is increasing as animal herds shrink. Cattle also gained.

Wholesale pork and hogs for immediate delivery to processors have climbed to the highest prices in 19 months, government data show. U.S. exports of the meat rose 6 percent in February from a year earlier. Two years of losses led farmers to cut their breeding herds to the lowest level on record.

"Supplies are a little bit tighter," said Dick Quiter, a broker at McFarland Commodities LLC in Chicago. "It sounds like a few people needed a few more hogs for the week's kill."

Hog futures for June settlement rose 1.125 cents, or 1.3 percent, to 86.075 cents a pound on the Chicago Mercantile Exchange. Earlier, the price touched 86.3 cents, the highest level for a most-active contract April 1997.

Eoin Treacy's view Meat prices, whether cattle or hogs fell precipitously as the credit crisis sapped demand and squeezed farmers' ability to feed their animals which brought the slaughter schedule forward. This thinned out herds which created the conditions for prices to advance as demand returned. (Also see Comment of the Day on August 19th 2009).

Due to slaughter schedules, meat contracts move in and out of backwardation at relatively predictable intervals over the course of the year. Right now is a seasonally strong time for the complex which needs to be taken into account as individual products move to new highs.

Lean Hogs appear to be on the cusp of moving into backwardation. The spread between the 1st and 2nd months often peaks in June with a seasonally weak period following. If the contract is to retain medium-term upside potential it will need to hold most of its recent gains through the seasonal pullback, preferably above $77. Lean Hogs broke upwards to new 13-year highs last week and continue to advance having doubled from the August lows. A downward dynamic, sustained for more than a few weeks, would be needed to check momentum, while a sustained move below $77 would be needed to break the progression of rising reaction lows.

Pork Bellies is also susceptible to the same cyclicality as Lean Hogs and remains in contango. Prices are currently testing the psychological $100 level and a sustained move below $90 would be required to question the consistency of the advance.

Feeder Cattle often move into backwardation during April; doing so on at least 4 other occasions since 2004. Prices have rallied impressively since December and are now testing the upper side of the 6-year range where peaks typically evolve in the third quarter, suggesting that some additional upside may be possible over the coming months. In the meantime, the uptrend remains consistent with a step sequence uptrend, albeit overextended relative to the moving average. A sustained move below $113 would indicate a larger reaction while a decline below $110 would pull back into the previous range and severely impact the trend's consistency.

Live Cattle has been in backwardation since January which is also a comparatively normal activity for the contract. Seasonally, the probability of the relationship moving back into contango over the next month or two is rising. Prices continue to sustain the move above $90 and would need to sustain a move back below that area to question potential for further upside.