U.S. livestock: Nearby lean hogs drop on continued herd expansion

Feeder cattle futures firm as corn drops

cme july lean hogs
CME July 2019 lean hogs with 20-, 50- and 100-day moving averages. (Barchart)

Chicago | Reuters — Chicago Mercantile Exchange (CME) lean hog futures were mixed on Friday, with nearby contracts pressured by plentiful supplies of hogs and pork and deferred months buoyed by signs of a slowing multi-year U.S. hog herd expansion, traders said.

Actively traded nearby contracts posted steep declines after the U.S. Department of Agriculture late on Thursday said the U.S. hog herd on June 1 was up 3.6 per cent from a year earlier, above estimates for a three per cent rise.

The agency’s quarterly hog supply report added to concerns about stiff competition in the pork market.

China, the world’s top pork consumer, has seen its domestic herd decimated by African swine fever, but the country’s imports of U.S. pork have thus far been smaller than anticipated.

Meanwhile, a Chinese ban on Canadian meat shipments stoked fears of increased competition from Canadian pork in other markets, including in the U.S. domestic market.

“We’re still wading through this glut of hogs,” said Dennis Smith, commodity broker with Archer Financial Services in Chicago.

“The other thing that’s weighing on the front end of the market is this concern about Canadian pork coming south with China banning all Canadian pork.”

CME July lean hogs were down 1.725 cents at 72.1 cents/lb. while actively traded August fell 1.175 cents to 76 cents/lb. (all figures US$).

October and December 2019 contracts were also lower, but most 2020 contracts posted gains on the day as USDA’s quarterly report also indicated multi-year U.S. herd expansion may be slowing.

The number of hogs kept for breeding increased just 1.4 per cent, below estimates for a 2.1 per cent rise.

Live cattle futures also ended mixed on Friday on end-of-month and end-of-quarter positioning, while feeder cattle firmed in response to sharply lower corn prices.

Actively traded CME August live cattle ended one cent lower at 104.35 cents/lb. Spot June futures expired on Friday at 110.5 cents, down 0.075 cent, reflecting steady to higher cash cattle prices.

Feedlot cattle at U.S. Plains markets traded from $109-$111/cwt on Friday. Prices in southern areas were mostly steady with last week, while areas further north notched modest week-on-week gains, traders said.

CME August feeder cattle jumped 1.05 cents to 136.85 cents/lb. after Chicago Board of Trade corn futures posted their steepest single-day drop in nearly three years.

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

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