Chicago | Reuters — U.S. hog futures tumbled on Tuesday as traders said a rally the previous day looked overdone in the face of large supplies.
Feeder cattle futures also weakened, while live cattle futures closed higher.
Hog futures pulled back after climbing on Monday, when traders were relieved that U.S. President Donald Trump had called off plans to impose tariffs on imports of Mexican goods.
Futures fell last week as traders worried the duties would prompt Mexico, the largest export market for U.S. pork by volume, to impose retaliatory tariffs on U.S. products like pork.
But Monday’s rebound was too strong given that farmers have expanded herds to meet demand from new processing plants, traders said. The U.S. Department of Agriculture (USDA) said 478,000 hogs were slaughtered on Tuesday, up from 447,000 a year earlier.
“We built premium back in yesterday and then the market said, ‘Whoops, we went a little too high. Let me look at that slaughter number again,'” said Jason Roose, commodity analyst at Iowa-based brokerage U.S. Commodities.
Chicago Mercantile Exchange July lean hogs fell 1.825 cents, to 84.375 cents/lb. August hogs dropped 1.875 cents, to 82.975 cents/lb.
USDA, in a monthly report on Tuesday, trimmed its forecast for pork production by 0.1 per cent to 27.288 billion lbs. from 27.323 billion in May, citing a slower-than-expected pace of slaughter. However, production is still up 3.7 per cent from 26.315 billion lbs. in 2018.
“You’re killing so many hogs here,” a Chicago-based livestock trader said.
USDA raised its pork export forecasts for 2019 and 2020, largely reflecting the removal of Mexico’s tariffs on U.S. pork products in late May. Mexico imposed the tariffs last year in a trade dispute with Washington, slowing U.S. pork exports.
USDA also lowered its forecast for beef production due to reduced expectations for the number of steers and heifers that will be slaughtered in the second half of the year.
Most actively traded August live cattle closed up 0.525 cent at 106.825 cents at the CME.
Follow-through buying helped the market rise after live cattle futures rose by the daily trading limit on Monday, traders said. Hopes for stronger cash prices after a recent decline also helped underpin the market, they said.
“I think it’s just more momentum trade here more than anything,” a cattle trader said.
CME August feeder cattle fell 1.7 cents, to 138.125 cents/lb.
— Reporting for Reuters by Tom Polansek in Chicago.