Chicago | Reuters — Chicago Mercantile Exchange lean hog futures rallied by their daily trading limits for a second straight day on Thursday on expectations that imports by China would surge as the country’s domestic hog herd is ravaged by a deadly hog disease.
All hog contracts posted new contract highs and spot futures reached their highest level in more than eight months.
China, the world’s top pork market, has reported 113 outbreaks of the highly contagious African swine fever since August, though farmers and industry insiders say several outbreaks are going unreported.
“This is all just a function of the extreme imbalance that the market perceives in demand versus supply,” said Dennis Smith, a commodity broker for Archer Financial Services in Chicago.
“If these losses in China are as big as we think they are, quite simply there’s not enough pork in the world,” he said.
April lean hogs settled up the CME’s expanded 4.5-cent limit at 78.325 cents/lb., a contract high (all figures US$). June through December contracts also ended up the daily limit.
The trading limit, which was expanded to 4.5 cents after hogs closed up the normal three-cent limit on Wednesday, will remain at 4.5 cents on Friday.
China’s pork imports could double this year as domestic production will fall by up to 20 per cent, a Rabobank analyst said Thursday.
But the country’s U.S. pork purchases have been limited so far.
Weekly export sales data released by the U.S. Department of Agriculture on Thursday showed Chinese imports at 3,043 tonnes in the week ended March 14, accounting for just 10 percent of the 29,302-tonne weekly total to all buyers.
A week earlier, China booked 23,846 tonnes, its third largest weekly purchases on record.
Live cattle futures followed hogs higher, supported by firm beef prices and concerns about delayed marketings due to poor U.S. Plains feedlot conditions following recent heavy precipitation.
Major floods in portions of the Plains further fueled concerns about tighter beef supplies, traders said. Cattle carcasses have been found tangled in debris or rotting in trees following the quick rise of floodwaters.
CME April live cattle futures ended up 0.325 cent at 129.9 cents/lb. while the June contract gained 0.525 cent to 123.9 cents.
April feeder cattle futures rose 0.6 cent to 148.925 cents/lb.
On Friday, USDA is set to release a monthly report that will show the number of cattle that were being fed for slaughter as of March 1.
— Karl Plume reports on agriculture and ag commodities for Reuters from Chicago.Tagged cattle futures, China, closing markets, CME, daily limit, feeder cattle, floods, hog contracts, hog futures, lean hogs, live cattle, Plains, swine fever, USDA