U.S. livestock: Hogs plunge on fresh doubts of China trade prospects

CME June 2020 lean hogs with Bollinger (20,2) bands, a gauge of market volatility. (Barchart)

Chicago | Reuters — U.S. lean hog futures fell more than four per cent on Wednesday, with the benchmark February contract at times dropping its daily three-cent limit on doubts about the prospects for a U.S. trade deal with China, the world’s top pork consumer.

February lean hog futures on the Chicago Mercantile Exchange (CME) settled down 2.85 cents at 66.775 cents/lb. after falling to 66.625 cents, the contract’s lowest point since Sept. 10 (all figures US$). The June contract ended down 2.9 cents at 84.35 cents/lb., down nearly 10 cents from last week’s high of 93.4 cents, or $93.40 per hundredweight.

“The deferred contracts, the February through the summer months, had built in a nice premium, anticipating we were going to have exports to China. And that has not happened. Without those exports, there is no way to maintain $90 price levels,” said Brian Hoops, president of Midwest Market Solutions.

“With these big (U.S. hog) numbers that we have, we need to be in the $60s, where the December contract is trading,” Hoops said.

Hopes for a U.S.-China trade deal faded on Wednesday after China blasted a U.S. Senate bill aimed at protecting human rights in Hong Kong. Completion of a “phase one” U.S.-China trade deal could slide into next year, trade experts and people close to the White House said.

China has sharply increased its imports of meat from global suppliers over the last year as it struggles with African swine fever, a deadly animal disease that has devastated its hog herd, the world’s largest.

But U.S. pork sales to China have been limited by steep tariffs that Beijing imposed last year as part of the countries’ trade war.

CME live cattle futures rose, supported by firm cash prices. Traders said cattle traded lightly in Texas and Kansas at $116/cwt, roughly $1 higher than last week.

“I think that was a little better than anticipated,” said Jeff French, analyst with Top Third Ag Marketing in Chicago, adding that the bulk of the week’s cash cattle trades would likely occur late this week.

CME February live cattle futures settled up 0.425 cent at 125.475 cents/lb., with front-month December ending up 0.525 cent at 119.3 cents.

CME January feeder cattle rose 0.05 cent to end at 144.075 cents/lb.

Traders await the U.S. Department of Agriculture’s monthly cattle-on-feed report on Friday. Analysts surveyed by Reuters on average expected the government to report the number of cattle placed in feedlots during October at 2.505 million head, up 11.4 per cent from a year ago.

— Julie Ingwersen is a Reuters commodities correspondent in Chicago.

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