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U.S. hog futures drop amid China pork testing move

Chicago Mercantile Exchange (CME) hog futures closed down sharply on Tuesday as lower cash hog prices and requests by China for extra testing of U.S. pork for a feed additive weighed, said analysts and traders.

China wants a third party to verify starting March 1 that U.S. pork shipped to the country is free of the feed additive ractopamine, used to promote lean muscle growth and banned in the European Union, Russia, Taiwan and mainland China.

"China is a huge market for U.S. pork and if we lose them it could really put a big dent in our overall exports," a hog futures trader said.

Futures sellers outnumbered buyers as packers lowered cash hog bids in an effort to realign their margins and stimulate wholesale pork demand.

The U.S. Department of Agriculture showed the average price for hogs in the most-watched Iowa/Minnesota market Tuesday at $79.15 per hundredweight (cwt), down $1.73 from Friday (all figures US$). put the average pork packer margin for Tuesday at a negative $10 per head, compared with a negative $12.55 on Feb. 12.

April hogs ended at 83.05 cents per pound, down 1.2 cents, and June closed 0.975 cent lower at 91.975 cents.

Live cattle slide on premiums

Live cattle futures settled lower amid futures’ premium to recent cash cattle prices, traders and analysts said. They also cited caution about cash prices for this week.

CME spot February live cattle closed at 126.4 cents/lb., down 0.1 cent. April ended 0.9 cent lower at 129.55 cents.

"April futures trading at roughly 129.5 cents looks awfully pricey when cash moved at $123 last week," said Oak Investment Group president Joe Ocrant.

There were no reports of cash cattle bids or asking prices by feedlots.

Investors are watching the wholesale beef sector for clues that the seasonal lull in demand may be about to end. Grocers and other buyers are expected to stock on product to feature in early March.

USDA put the wholesale price for choice beef on Tuesday at $182.47/cwt, up 52 cents from Friday; select cuts gained 48 cents to $180.88.

Traders are also tracking wintry weather in the central and western U.S. Plains that could slow the movement of livestock to market, thereby supporting cash prices.

Feeder cattle futures ended lower with live cattle market losses.

March feeders closed down 0.2 cent/lb. to 143.175 cents. April closed at 146.175 cents, 0.45 cent lower.

— Theopolis Waters writes for Reuters from Chicago.

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