LIVESTOCK-Hog futures notch new highs on tight U.S. supply

CHICAGO, March 26 (Reuters) - Lean hog futures on the Chicago Mercantile Exchange found life-of-contract highs for a second day on Friday after the U.S. Agriculture Department reported tight supplies in its quarterly hogs and pigs report after the close Thursday.

CME April lean hogs settled up 1.125 cents at 100.800 cents per pound, after reaching a contract high of 101.975 cents, while most-active June hogs closed 2.275 cents higher at 105.600 cents per pound after reaching 105.850 cents.

The USDA's quarterly report noted a 2% drop in the U.S. herd as of March 1, compared with a year earlier, well below analyst expectations.

"The front-end (futures) months led, up on tighter supplies going into late spring and summer," said Doug Houghton, technical analyst at Brock Capital Management. "Farrowing intentions were down – it only looks like tighter supplies ahead."

The USDA also projected a 4% drop in sows birthing new piglets from June to August, compared with a year earlier.

Tight hog supplies have boosted the cash market as well, traders said.

"Packers look like they are having to compete for hogs for the first time in a long while," said Dan Norcini, independent livestock trader. "The cash market continues to be very strong."

Cattle markets also firmed, supported by cash cattle trade and strong consumer demand for beef.

CME April live cattle settled up 0.550 cent at 120.100 cents per pound while benchmark June futures added 0.700 cent to 121.775 cents.

CME May feeder cattle gained 0.750 cent to 149.875 cents per pound, while back months notched life-of-contract highs, as October feeder cattle reached 159.275 cents per pound on anticipated tight supplies and lower feed costs this fall.

"The market’s still looking at tighter cattle supplies the second half of the year," Houghton said.

Market-ready cattle across the U.S. Plains traded at $115 and $116 per cwt this week, gaining $1 to $2 from the week prior, while the USDA reported choice beef cuts climbing $1.21 to $237.66 per cwt. (Reporting by Christopher Walljasper; additional reporting by Julie Ingwersen; editing by Jonathan Oatis)