U.S. livestock: Lean hogs drop on burdensome supply, export jitters

CME December 2019 lean hogs with Bollinger (20,2) bands. (Barchart)

Chicago | Reuters — U.S. lean hog futures slumped on Tuesday, pressured by abundant near-term hog supplies and concerns that U.S. pork export demand would not be large enough to absorb the expected surplus of meat produced.

Hopes for a jump in Chinese demand for U.S. pork have supported hog futures at times in recent months. China’s demand for imported pork has risen this year as a deadly hog disease, African swine fever, has decimated its domestic herd.

But U.S. shipments to the world’s top pork consuming country have been largely disappointing and steep retaliatory tariffs on U.S. shipments remain in place.

Meanwhile, massive U.S. hog supplies have weighed down cash hog prices, which are at a large discount to futures.

The average cash hog price in the closely followed Iowa and southern Minnesota market were down $1.04/cwt on Tuesday at $56.35/cwt (all figures US$).

Chicago Mercantile Exchange (CME) December lean hog futures, the most active contract, settled down 2.325 cents at 65.5 cents/lb.

“We have questions about the demand, while at the same time the supply looks ridiculously large,” said Rich Nelson, chief strategist with Allendale Inc.

“We see a 4.5 per cent increase in fourth-quarter production. That’s an extra 1.1 billion lbs. shoved onto this market. Any concerns about China not buying means we’ve got some mispricing in these December futures,” Nelson said.

CME live cattle futures ended mostly lower, with spot October futures dragged down by a wave of deliveries against futures which indicate futures are overpriced.

October live cattle ended down 1.075 cents at 109.875 cent/lb. while actively traded December live cattle settled down 0.175 cent at 113.7 cents/lb.

CME November feeder cattle futures were up 0.65 cent at 143.5 cents/lb., while actively traded January was up 0.7 at 139.8 cents.

Cold storage data released by the U.S. Department of Agriculture after the close appeared supportive to both hogs and cattle due to declines in beef and pork stocks in September, normally a stock-building month.

— Karl Plume reports on agriculture and ag commodities for Reuters from Chicago.

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