U.S. livestock: CME lean hogs up third straight session

CME June 2019 lean hogs with 20-, 50- and 100-day moving averages. (Barchart)

Chicago | Reuters — Chicago Mercantile Exchange (CME) lean hog futures closed higher on Friday for a third straight session on expectations that an outbreak of African swine fever in China’s hog herd would prompt the Asian country to import more pork, traders said.

Traders were still digesting Thursday’s export sales report from the U.S. Department of Agriculture showing that China bought more than 77,700 tonnes of U.S. pork in the latest week.

Up to 200 million pigs could be culled or die from being infected as African swine fever spreads through China, Rabobank said, by far the highest such forecast yet and underscoring the gravity of the epidemic in the world’s top pork producer. Such a number would mark a huge swath of the country’s pig herd, which Rabobank says stood at 360 million animals late last year.

“People think that equates to — eventually — big Chinese purchases in the world that ultimately filter back to the United States,” said Don Roose, president of Iowa-based U.S. Commodities.

Most-active CME June lean hog futures settled up 0.8 cent on Friday at 98.5 cents/lb. (all figures US$).

The market was choppy and volatile, however, after surging to contract highs last week on pork export optimism, and the June contract posted a slight decline for the week.

Some noted reports of Canadian officials mulling new retaliatory tariffs against the U.S. as a bearish market factor.

“It will not stop the general China trade story, but it is a concern,” said Rich Nelson, chief strategist with Illinois-based Allendale Inc.

CME live cattle and feeder cattle futures closed higher on Friday, buoyed by strength in the hog market and expectations of improving beef demand.

“You’ve got a spillover effect from a bullish psychology that has gripped the hog market, which makes it hard to get aggressively negative on cattle. That sparks some short-covering among the weak-handed shorts,” said independent livestock futures trader Dan Norcini.

Benchmark CME June live cattle futures rose 1.025 cents to close at 121.45 cents/lb. and front-month April settled up 0.55 cent at 126.55 cents.

April feeder cattle futures settled steady at 145.425 cents/lb. while May feeders rose 0.65 cent at 150.5 cents.

“We are going into one of the best times of the year for beef. Easter is so late, and we’ve had this cold weather that is not conducive to getting the grills out. Once we get past Easter, you will see those beef prices rise,” Norcini said.

Traders were still assessing the impact of a blizzard this week that pummeled South Dakota and Minnesota. The storm followed weeks of poor conditions in Nebraska feedlots that have reduced cattle weights.

“We may be talking four to five weeks for cattle to catch up on the weight side,” Norcini said.

— Julie Ingwersen is a Reuters commodities correspondent in Chicago.


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