Chicago | Reuters — U.S. hog futures fell on Monday in a turnaround from a two-week high last week, as large inventories pressured prices.

Meat packers slaughtered an estimated 496,000 pigs, up from 475,000 a year ago, putting extra pork on the market.

U.S. hog supplies are large after farmers expanded their herds to supply new slaughterhouses that opened in recent years. Producers are now hoping for an initial deal to ease the trade war with China, the world’s top pork consumer, to increase export demand.

“We have too much supply and not enough demand at this time,” a U.S. commodity broker said.

Lean hogs for February delivery closed 0.85 cent weaker at 66.7 cents/lb. (all figures US$) at the Chicago Mercantile Exchange (CME).

Futures look over-valued, particularly in summer 2020 contract months, without more buying from China, a broker said.

Beijing said on Friday it will waive import tariffs for some pork and soybean shipments from the United States, and U.S. exporters said on Monday that Chinese importers bought U.S. soybeans.

China imposed steep tariffs on U.S. agricultural products last year in retaliation for U.S. duties on Chinese goods during a 17-month trade war that has rattled global markets.

China needs to import more pork after an outbreak of a fatal pig disease decimated its herd. Its pig herd increased by two per cent in November compared with the prior month, the agriculture ministry said on Monday, the first increase in a year.

Chinese pork prices have surged to record levels due to the outbreak of the disease, African swine fever, putting Beijing under pressure to ensure meat supplies ahead of important upcoming holidays.

In the U.S., most meat buyers have already priced beef for the holiday season, said Larry Hicks, president of CattleHedging.com. This will contribute to a stalling of cash cattle prices, he said.

“The cattle are committed for the Christmas holidays, so you’ll see the packer back off a little bit, and the cash will back off,” he said.

Margins for U.S. beef packers eased to $148 per head of cattle from $171.05 on Friday, according to livestock marketing advisory service HedgersEdge.com.

CME February live cattle dropped 0.225 cent, to 124.75 cents/lb. January feeder cattle futures dipped 0.025 cent to 141.525 cents/lb.

— Tom Polansek reports on agriculture and ag commodities for Reuters from Chicago.