U.S. livestock: Lean hogs tumble for third straight session

Friday's USDA report drags on deferred months in cattle

CME august lean hogs
CME August 2019 lean hogs with 20-, 50- and 100-day moving averages. (Barchart)

Chicago | Reuters — Chicago Mercantile Exchange (CME) lean hog futures fell sharply for a third straight session on Monday in a technical and fund- selling drop fueled by ample supplies of hogs and pork.

Actively traded nearby contracts shed more than four per cent, with losses over the past three sessions topping 10 per cent.

Hog futures tumbled despite signs of improving pork import demand by China, the world’s top market, to compensate for herd losses due to a fatal hog disease, African swine fever. Customs data showed China’s pork imports surged nearly 63 per cent in May from the same month last year.

But shipments of U.S. pork to China have so far fallen short of market expectations and supplies in U.S. cold storage warehouses have swelled.

U.S. slaughter rates, meanwhile, are rising as hogs held back from the market by farmers anticipating a China-led bump in prices are now sending those animals to slaughter.

“We’re just not moving the pork like we need to,” said Mike Zuzolo, president of Global Commodity Analytics.

CME July lean hog futures tumbled 3.4 cents, to 72.85 cents/lb., while the most active August contract dropped 3.675 cents, to 74.225 cents/lb. (all figures US$). Both were the lowest since August 2018.

Trading limits had been expanded to 4.5 cents on Monday after Friday’s limit-down close. The limits will revert back to their normal three cents on Tuesday.

Live and feeder cattle futures came under pressure from a U.S. Department of Agriculture report, released late on Friday, showing larger-than-expected feedlot cattle placements in May.

USDA also said there were 11.7 million head of cattle in feedlots on June 1, in line with analysts’ expectations. That was the highest June 1 inventory since the agency began tracking the data in 1996.

USDA cold storage data showing a 13 per cent drop in total beef supplies at the end of May, compared with a year earlier, offset some weakness in live cattle.

Unwinding of short cattle/long hog positions further underpinned live cattle prices and pressured hogs.

CME August live cattle ended up 0.2 cent at 102.425 cents/lb. Deferred month contracts were down 0.125 to 0.475 cent. CME August feeder cattle ended 1.9 cents lower at 131.775 cents/lb.

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

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