U.S. livestock: Futures rally on choppy grains, hopes for Chinese buying spree

Chicago | Reuters – Chicago Mercantile Exchange (CME) live hog futures rallied on Tuesday, as competition among packers for spot delivery grew and animal weights slipped after the recent U.S. heat wave, traders said.

Live cattle futures also inched up, supported in part by choppy trading in U.S. grain futures and growing questions of whether cow-calf operators will continue to slow the expansion of their beef herds.

But the big mover of the day was in pork, as packers began vying for supplies, said Dennis Smith, a commodity broker with Archer Financial Services in Chicago.

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“The producers finally got caught up on their marketing, and there’s finally – for the first time in ages – competition from the packers,” Smith said.

Hog futures also continued to be bolstered by the livestock market’s expectations for increased demand for American pork from China, the world’s top importer, traders said.

But those hopes have pushed up hog futures sharply, and created a nearly $13-per-cwt premium over the nearby cash prices – a price rally that some traders say could be very short-lived, given the U.S. industry’s hefty supplies.

Inventories of various pork products in cold storage at the end of June were estimated at 622.4 million pounds, 10.8% higher than a year ago and 8.1% higher than the five-year average, according to U.S. Department of Agriculture data released late on Monday.

“Everyone is still talking about how Chinese pig prices were up nearly 6% last week, and that might have demand pressure growing in China and Asia,” said Don Roose, president of U.S. Commodities in West Des Moines, Iowa. “You have funds taking a big stance on that.”

CME August lean hog futures closed the day up 2.95 cents at 86.175 cents per pound, while October hogs climbed 2.6 cents to 81.8 cents.

The latest beef cold-storage inventory was seen as supportive for the cattle sector, traders said. The total supply of beef in cold storage at the end of June was 395.5 million pounds, more than 12% less than a year ago.

CME August live cattle futures closed up 0.6 cents at 109.05 cents per pound. CME October cattle rose 0.725 cents to 109.875 cents per pound.

CME August feeder cattle futures settled the day up 0.025 cents to 142.2 cents per pound. September feeders edged up 0.025 cents to 142.45 cents per pound.

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