Chicago | Reuters — U.S. hog futures sank by their daily trading limit to contract lows on Thursday under pressure from hefty supplies and fears about the spreading coronavirus outbreak.
Cattle futures also hit multi-month lows.
U.S. hog supplies are large after farmers expanded their herds to supply new processing plants. But traders are now worried the new coronavirus will hurt economic growth and demand in China, the world’s top pork consumer.
Traders were previously waiting for an increase in Chinese buying since Beijing pledged in an initial trade deal on Jan. 15 to significantly increase purchases of U.S. farm goods.
“That’s the perception: that it’s going to slow down the Chinese economy,” said Dennis Smith, commodity broker for Archer Financial Services in Chicago.
February lean hog futures fell the three-cent limit, to 61.3 cents/lb., at the Chicago Mercantile Exchange (all figures US$). The most-active April contract also dropped three cents to 65.825 cents. CME on Friday will temporarily expand the daily limit to 4.5 cents.
April live cattle futures eased 0.025 cent to 120.2 cents/lb. at the CME and hit their lowest since Oct. 10. March feeder cattle futures reached their lowest since Sept. 23 before ending up 0.675 cent at 135.65 cents/lb.
China needs to import more meat after an outbreak of a fatal pig virus, African swine fever, devastated its herd and pushed Chinese pork prices to record highs.
Weekly U.S. pork export sales to China were relatively small at 1,506 tonnes from Jan. 17 to 23, according to U.S. Department of Agriculture data. But weekly shipments to China reached 18,617 tonnes, the most since July 2014, the data showed.
“Exports are ripping just like we thought they would,” Smith said.
U.S. beef export sales to China were 207 tonnes and shipments were 96 tonnes, according to USDA data.
The agency on Friday will issue a separate biannual report on domestic cattle inventories.
— Tom Polansek reports on agriculture and ag commodities for Reuters from Chicago.