Chicago | Reuters — Some Chicago Mercantile Exchange hog contracts on Tuesday fell more than two per cent at one point after Mexico announced it imposed tariffs on U.S. pork, traders said.
Mexico imposed tariffs on U.S. products ranging from steel to pork and bourbon in retaliation for higher import duties by Washington on Mexican metals.
The U.S. exports a significant amount of bone-in hams to Mexico for deboning because of cheaper labour, Linn Group analyst John Ginzel said. The finished product is either consumed domestically, exported elsewhere or returned to the U.S. as a muscle cut.
In 2017 Mexico was the largest volume market for U.S. pork exports at more than 800,000 tonnes worth $1.51 billion, according to the National Pork Producers Council (all figures US$).
CME hog contracts settled off session lows amid bargain buying stirred by higher prices for wholesale pork and market-ready, or cash, hogs.
Packers competed for hogs while keeping pace with spring grilling demand and retail buying ahead of June 17 Father’s Day advertisements, said analysts and traders.
Processors may soon resist paying more for supplies after their margins recently slipped into single digits, they said.
June hogs closed 1.05 cents/lb. lower at 76.525 cents. July ended 0.9 cent lower at 77.025 cents.
Live cattle futures rally
Short-covering and technical buying rallied CME live cattle futures from Monday’s losses, traders said.
Optimism regarding this week’s cash prices and investors’ buying cattle contracts and simultaneously selling hog futures enhanced CME live cattle market advances, they said.
June live cattle closed 2.475 cents/lb. higher at 107.2 cents. August ended up 1.6 cents at 104.05 cents.
On Tuesday packers in Texas and Kansas posted bids of $107/cwt for slaughter-ready, or cash, cattle against feedlots asking $114-$115. The bulk of cash cattle last week in the Plains brought $110.
Market participants await Wednesday’s Fed Cattle Exchange sale of 568 animals. Cattle there last week fetched $110/cwt.
Cash cattle prices may have bottomed out seasonally and beef demand may improve, at least until consistently hot summer weather curbs enthusiasm for cooking outdoors.
“It’s not fun standing next to a hot grill in 100-degree (F weather,” a trader said.
Higher cash feeder cattle prices and buying in the neighbouring live cattle market boosted CME feeder cattle contracts.
August closed 1.5 cents/lb. higher at 146.35 cents.
— Reporting for Reuters by Theopolis Waters in Chicago.