Chicago | Reuters — Chicago Mercantile Exchange (CME) lean hog futures fell by an exchange-imposed limit for a second consecutive session on Thursday as commodities declined broadly.
Selling by index funds fueled losses in markets from hogs to cattle and corn, after the U.S. Federal Reserve signaled it might raise interest rates sooner than expected, said Dennis Smith, a commodity broker for Archer Financial Services in Chicago.
The front two CME lean hog contracts tumbled by an expanded 4.5-cent limit. July hogs settled at 111 cents/lb. while August hogs closed at 107.2 cents (all figures US$). Both contracts touched their lowest prices in about a month.
The CME said daily limits would remain widened at 4.5 cents on Friday.
“It appears to me the whole commodity world got caught up in a massive index fund redemption day,” Smith said.
The U.S. Department of Agriculture, in a weekly report, said net export sales of U.S. pork reached 29,300 tonnes in the week ended June 10, up 49 per cent from the previous week.
China, the world’s biggest pork consumer, canceled 422 tonnes, its first weekly net decrease this year, according to USDA data.
Traders are uncertain about China’s demand after Chinese state media on Wednesday reported the country’s pig herd rose 23.5 per cent in May from a year earlier.
China has been a key buyer of U.S. pork since the deadly African swine fever virus began decimating its hog herd three years ago.
Still, Thursday’s losses had “nothing to do” with demand or the U.S. cash market for hogs, Smith said.
“The public has turned sellers of all commodities,” he said.
CME August live cattle futures settled down 3.825 cents at 121.1 cents/lb. after reaching a contract high of 125.775 cents on Wednesday. August feeder cattle ended 0.3 cent lower at 157.4 cents/lb. after setting a two-month high earlier in the session.
— Tom Polansek reports on agriculture and ag commodities for Reuters from Chicago.