U.S. livestock: Escalating trade war pressures CME hog futures

Chicago | Reuters — Concerns about a prolonged trade war between the United States and China pressured U.S. lean hog futures on Friday, while cattle futures advanced.

U.S. and Chinese negotiators ended two days of talks to try to salvage a trade deal in Washington on Friday after the U.S. imposed a new set of tariffs on Chinese goods.

U.S. farmers had been hoping as recently as last month that the two sides would resolve the dispute, which has slowed shipments of American pork, soy and other farm goods to China.

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However, traders still project that demand for U.S. pork will increase toward the end of the year and in 2020 due to an outbreak of the fatal hog disease African swine fever in China. The epidemic is estimated to wipe out tens of millions of hogs, lifting China’s need for meat imports.

The U.S. will either supply China’s increased needs directly or boost shipments to other markets when competitors ship more pork to China, said Rich Nelson, chief strategist for broker Allendale.

“I don’t think anyone is really going to change their viewpoint on exports because of the trade talks,” Nelson said.

June lean hog futures closed 0.325 cent lower at 89.675 cents/lb. at the Chicago Mercantile Exchange (all figures US$). July lean hogs dipped 0.225 cent to 90.75 cents.

December lean hogs rose 0.75 cent to 81.725 cents, though. CME’s 2020 hog contracts were also higher, supported by expectations for increasing export demand next year.

U.S. President Donald Trump said on Twitter the government will help farmers suffering from the U.S.-China trade war by buying U.S. agricultural products to ship to poor countries, an idea supported by the National Pork Producers Council.

Separately, the U.S. Department of Agriculture in monthly report raised its forecast for 2019 pork exports from April by one per cent and projected 2020 exports will be up about seven per cent.

Traders said the estimates seemed conservative given widespread hog deaths in China, the world’s top swine producer and pork consumer.

USDA also raised its 2019 hog price forecast but lowered its outlook for cattle prices.

Still, traders said cattle futures looked undervalued.

CME June live cattle futures ended 0.5 cent higher at 112.45 cents/lb. August live cattle rose 1.3 cent to 108.9 cents/lb.

August feeder cattle advanced 2.35 cents to 146.825 cents per pound, while September feeder cattle jumped 2.5 cents at 147.775 cents.

— Tom Polansek reports on agriculture and ag commodities for Reuters from Chicago.

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