U.S. livestock: Hogs limit up on U.S.-Mexico deal, China swine fever

Chicago | Reuters — Chicago Mercantile Exchange lean hog futures surged by their daily three-cent price limit on Monday, buoyed by hopes of increased U.S. pork exports following news of a trade deal with top importer Mexico, traders said.

Hog futures were further supported by the outbreak of African swine fever in China, which has the world’s largest hog herd and could potentially be forced to boost pork imports if the disease worsens.

Prices for U.S. hogs opened the week’s trading higher following news on Sunday that China’s Shandong province would ban live hogs from areas of high risk for African swine fever (ASF) from entering the province.

News at midmorning prompted even more gains, with the U.S. and Mexico agreeing to overhaul the North American Free Trade Agreement.

“Before the NAFTA news, I think it was the trade still trying to wrap its head around this African swine fever … That was a kicker,” said U.S. Commodities president Don Roose.

“And then it got the double-kicker with NAFTA — now it’s a bilateral agreement between Mexico and the U.S. And remember, they (Mexico) have a 20 per cent tariff on our pork products. So I think it’s a one-two punch.”

CME October lean hogs settled three cents higher at 54.775 cents/lb. and December was also up three cents at 54.225 cents (all figures US$). Following the limit-up settlement, trading limits in hogs on Tuesday will expand to 4.5 cents, according to the CME Group.

The U.S. Department of Agriculture also announced that U.S. hog farmers as well as growers of soybeans and other crops can apply for direct payments to offset lower prices because of trade disputes between the U.S. and China, Mexico and other partners.

CME cattle futures also were higher, on spillover support from gains in the hog markets and on technical buying.

CME September feeder cattle were up 3.2 cents at 150.675 cents/lb., jumping after falling to a roughly two-month low of 146.475 cents earlier in the session.

Most-active CME October live cattle were up 2.6 cents at 109.3 cents/lb., recovering from the lowest levels since July 11.

— Michael Hirtzer reports on commodity markets for Reuters from Chicago; additional reporting by Julie Ingwersen in Chicago.