U.S. livestock: CME lean hogs sag on uncertainty over trade talks

(Deyana Robova photo/iStock/Getty Images)

Chicago | Reuters –– U.S. hog futures sagged on Wednesday for a third straight session on a perceived lack of progress in U.S. trade negotiations with key pork consumers China and Mexico, traders said.

CME Group live cattle futures followed hogs lower, with burdensome supplies adding pressure.

Most-active CME October lean hog futures settled down 2.625 cents at 53.6 cents/lb. and December fell 2.225 cents at 51.675 cents (all figures US$).

Hog futures declined as trade talks with China, a key buyer of U.S. pork, got under way with a prediction by U.S. President Donald Trump that there would be no real progress.

“We built in a premium (last week) on some positive news out of Mexico on trade, hopes of some positive news out of these talks (with) China, and the African swine fever. Well, we have had no new cases of African swine fever, and nothing new or positive out of the Chinese talks. And so consequently we had a lot of liquidation,” said Don Roose, president of Iowa-based U.S. Commodities.

In April, China slapped a 25 per cent import duty on most U.S. pork items in response to U.S. tariffs on Chinese steel and aluminum products. Pork products were also included in a second round of tariffs introduced in July.

Mexico and the U.S. are close to resolving remaining bilateral issues in the revamp of the NAFTA trade deal, officials said, but hopes of squaring away differences on Wednesday were pushed to at least later this week.

Live cattle futures also fell, following the weak trend in hogs.

CME August live cattle futures ended down 1.05 cents at 108.225 cents/lb. The most-active October live cattle contract fell 1.575 cents, to 108.9 cents.

CME August feeder cattle futures fell 0.475 cent to settle at 148.7 cents/lb. and September feeders were down 1.85 cents, at 149.15 cents.

After the close, the U.S. Department of Agriculture’s monthly cold storage report pegged total beef supplies in refrigerated warehouses as of July 31 at 485 million pounds, up eight per cent from the previous month and a record high for July.

“For beef, this was a pretty bearish number, a bigger supply than expected,” said Rich Nelson, chief strategist with Allendale Inc., adding the data could pressure CME cattle futures on Thursday.

Traders await USDA’s Cattle on Feed report on Friday. Analysts surveyed by Reuters on average expect the government to report a year-on-year increase in the number of cattle on feed as of Aug. 1.

Reporting for Reuters by Julie Ingwersen.

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