Chicago | Reuters — U.S. lean hog futures rose more than one per cent on Friday, following broad strength in commodities tied to hopes for a U.S.-China trade deal, along with firm cash values for hogs and pork, analysts said.
Chicago Mercantile Exchange benchmark December lean hog futures settled up 1.125 cents at 69.6 cents/lb. (all figures US$).
After the CME close, the U.S. and China agreed to the first phase of a deal to end a trade war, prompting President Donald Trump to suspend a threatened tariff hike. However, the announcement did not include many details, and Trump said it could take up to five weeks to get the deal written.
Treasury Secretary Steven Mnuchin said agricultural purchases could scale up to $40 billion to $50 billion annually as part of the partial trade deal, potentially more than doubling the $24 billion in agricultural and related products China purchased from the U.S. in 2017.
“(China’s) demand for imported protein is very strong, as evidenced by all the pork, beef and chicken they have been taking in recent months, and now maybe the U.S. will participate in that,” said economist Bill Lapp, president of Advanced Economic Solutions.
The deal came a day after the U.S. Department of Agriculture confirmed record-large weekly sales of U.S. pork to China, including 18,810 tonnes for shipment this year and 123,362 tonnes for 2020.
Bullish cash market signals lent further support to hog futures. The U.S. pork cutout rose 61 cents on Friday and was up more than $2 from last week, even as the weekly U.S. hog slaughter rose about nine per cent from a year ago, to a projected 2.725 million head, according to U.S. Department of Agriculture data.
“Wholesale pork prices have been up this week, despite the fact we are putting together a huge slaughter. It’s pretty impressive,” Brock Associates analyst Doug Houghton said.
CME cattle futures closed higher as well, although traders were still waiting to see where the bulk of cash cattle would trade this week.
December live cattle futures ended up 0.725 cent at 112.15 cents/lb. after reaching 112.3 cents, the contract’s highest since Aug. 9.
CME November feeder cattle futures settled up 0.125 cent at 144.25 cents/lb.
Boxed beef prices rose for choice and select cuts.
“The cash trend continues to be good in feeders and fats. (Futures are) probably due for a little bit of pull-back, given a five-week rally,” said Craig VanDyke, senior risk manager at Top Third Ag Marketing.
— Julie Ingwersen is a Reuters commodities correspondent in Chicago.