Chicago | Reuters – Chicago Mercantile Exchange lean hog futures closed mixed on Thursday as pressure from news of a deadly hog disease in the Dominican Republic offset support from strong export sales and firm cash hog prices, traders said.
CME August lean hog futures settled up 0.600 cent at 106.300 cents per pound, while the most-active October hog contract ended down 0.550 cent at 88.975 cents.
October hogs fell after the U.S. Department of Agriculture late on Wednesday confirmed African swine fever in samples from pigs in the Dominican Republic, raising concerns about the risk for transmission to the United States.
The disease destroyed half of China’s hog herd, the world’s largest, within a year of being detected there in 2018.
“Traders don’t want to get long positions in that market, especially if you have the potential for African swine fever to show up over here,” said Dan Norcini, an independent livestock trader.
However, the October contract pared losses and other hog contracts rose, supported by strong weekly U.S. pork export sales and ideas that futures are undervalued relative to cash hog prices. The CME’s lean hog index, a two-day weighted average of cash prices, was $111.94 per hundredweight, or nearly 112 cents per pound, while October futures are below 90 cents a pound.
The USDA reported export sales of U.S. pork in the week ended July 22 at 38,500 tonnes, up 43 percent from the prior four-week average. Yet weekly sales to China, a key buyer, were a modest 800 tonnes.
“There is a lot of nervousness in the hog market right now about whether prices can stay at these levels. A lot of those (futures) prices were baked in, figuring that you were having Chinese buying (U.S. pork) all year long,” Norcini said.
In the cattle markets, futures fell as drought drove up U.S. corn and wheat prices, signaling higher feed costs.
Benchmark CME October live cattle futures settled down 0.375 cent at 128.150 cents per pound, pressured as September feeder cattle tumbled 1.500 cents to finish at 161.950 cents per pound.
The USDA reported U.S. beef export sales for the week to July 22 at 22,500 tonnes, down from the previous week but up 28 percent from the prior four-week average.