Chicago | Reuters –– U.S. lean hog futures surged about five per cent on Monday, reversing from one-month lows on investor optimism that a weaker dollar would spark increased export demand for pork, traders and analysts said.
Live cattle fell to a roughly one-month low while feeder cattle futures declined to lifetime lows at the Chicago Mercantile Exchange. Each commodity tumbled as part of a broad sell-off amid worries about slowing economic growth in China.
Hogs posted some of the largest gains seen in commodities or equities. Front-month October futures rose by their three-cent daily price limit to finish at 65.825 cents/lb. (all figures US$).
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Hogs “have the best demand outlook,” said Mike Zuzolo, analyst at Global Commodity Analytics.
The hog herd in China has declined, giving investors’ hope the country will ramp up imports of pork even as the country’s currency devaluation this month made such purchases more expensive for goods priced in dollars.
Futures are also priced at a steep discount to the CME Group’s lean hog index that reflects trading in the cash market. But hog prices tend to decline around this time of year, after retailers wrap up buying for the Labour Day holiday on the first Monday of September.
“There’s a lot of concern that supplies might become burdensome, but some people see this as an opportunity to buy,” said Doug Houghton, analyst at brokerage Brock and Associates.
Live cattle futures for October delivery fell two cents to 141.85 cents/lb., the lowest since July 27.
CME October feeder cattle were down 4.475 cents to 195 cents/lb., just above their earlier contract low of 192.725.
Weakness in stock markets often weighs on cattle prices amid worries that poor market returns force consumers to choose cheaper meat cuts than pricy steaks and chops.
A monthly cattle report released after the close of trading on Friday also was seen as mildly bearish to prices. The number of cattle on feed as of Aug. 1 was up three per cent from a year ago, above analyst expectations of a 2.5 per cent rise, U.S. Department of Agriculture data showed.
— Michael Hirtzer reports on agriculture and ag commodity markets for Reuters from Chicago.
