U.S. livestock: Hogs drop on large supply, trade war jitters

CME December 2019 lean hogs with 20-, 50- and 100-day moving averages. (Barchart)

Chicago | Reuters –– U.S. livestock futures dropped on Wednesday, with lean hogs stumbling under pressure from large supplies in a turnaround from a rally a session earlier.

Fresh uncertainty over U.S.-China trade relations added pressure to the hog market, analysts said.

Traders and meat producers are hoping for further U.S. pork sales to China, which is grappling with a fatal pig disease that has killed up to half its herd since August 2018. China is the world’s largest hog producer and pork consumer.

However, sales are being hampered by steep tariffs that Beijing imposed on imports of U.S. pork last year as part of the countries’ bruising trade war. The Wall Street Journal reported that trade negotiations have hit a snag over farm purchases.

The hog market also faces continued pressure from a record-large U.S. herd and increasing weights, traders said. The estimated average weight for the week ended Nov. 9 was 287.9 lbs., up from 286.7 a week earlier and 284 a year earlier, according to the U.S. Department of Agriculture.

“It’s putting so much extra supply on the market,” a trader said.

Chicago Mercantile Exchange (CME) December lean hogs fell 1.6 cents to 63.125 cents/lb. (all figures US$). That was near a two-month low reached on Monday. February hogs slid one cent, to 74.55 cents/lb.

The market pulled back after rising on Tuesday on technical buying and short covering.

Cattle futures also retreated following recent gains.

February live cattle futures dropped 1.475 cents, to 124.1 cents/lb., after touching a 6-1/2 month high on Tuesday. January feeder cattle sank 4.3 cents, to 142.825 cents/lb., a day after touching a six-month high.

Traders said they expected cattle futures will bounce back as margins for beef packers are strong. Estimated margins were $348.90 per head, up from $333.10 on Tuesday and $342.55 a week ago, according to livestock marketing advisory service HedgersEdge.com.

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

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