U.S. livestock: Hogs limit down on new China stats

Live cattle futures up with cash values

CME August 2021 lean hogs (candlesticks) with 20- and 100-day moving averages (pink and black lines) and August 2021 live cattle (dark red line). (Barchart)

Chicago | Reuters — Chicago Mercantile Exchange (CME) lean hog futures fell their daily three-U.S.-cent limit on Wednesday, pressured by falling U.S. wholesale prices for pork products and news of increasing hog numbers in China, traders said.

China’s pig herd rose 23.5 per cent in May from a year earlier, state media said on Wednesday, citing the ministry of agriculture and rural affairs.

CME hog futures tumbled as the figures raised questions about export demand from China, which has been a key buyer of U.S. pork since its herd, the world’s largest, was decimated by the deadly African swine fever virus. China’s herd plunged 40 per cent in 2019, official data showed. More recently, as animal numbers rebound, live hog prices in China have fallen.

“The news out of China, with the hog herd supposedly being rebuilt, spooked everybody,” said Dan Norcini, an independent livestock trader. Commodity funds hold a net long position in CME lean hog futures, he noted, leaving the market vulnerable to bouts of long liquidation.

At the CME, the front five lean hog futures contracts fell the daily three-cent limit, with most-active July settling down three cents at 115.5 cents/lb. and August at 111.7 cents (all figures US$).

The CME said daily limits would expand to 4.5 cents for Thursday’s session.

Traders also noted a steep drop in U.S. prices for pork bellies, which are used to make bacon. The U.S. Department of Agriculture on Tuesday afternoon reported wholesale belly prices at $148.98 per hundredweight, a plunge of $48.35 from the day before.

“The sharply lower belly cutout yesterday added to the fear that demand might be slowing down,” Norcini said.

In contrast to the hog market, CME cattle futures closed higher on Wednesday, with live cattle futures notching life-of-contract highs on a strengthening cash cattle market, traders said.

CME August live cattle futures settled up 1.025 cents at 124.925 cents/lb. after reaching a contract high at 125.775 cents. August feeder cattle futures ended up 0.875 cent at 157.7 cents/lb.

Market-ready cattle traded in Kansas and Texas this week at $121-$122/cwt, traders said, up from trades of $119-$120 last week.

— Julie Ingwersen is a Reuters commodities correspondent in Chicago.

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