U.S. livestock: Hog futures limit up on pork export optimism

CME live cattle follow lean hogs higher

CME October 2020 lean hogs with Bollinger (20,2) bands. (Barchart)

Chicago | Reuters — U.S. lean hog futures closed up their daily limit on Thursday as confirmation of a case of African swine fever in a wild boar in Germany fueled expectations that pork importers would turn to the United States for supplies, traders said.

Firming cash hog values and rising wholesale pork prices added support.

Chicago Mercantile Exchange (CME) October lean hog futures settled up the three-cent limit at 64.375 cents/lb., the contract’s highest since March 13 (all figures US$). Traders said activity in options markets pointed to a higher open for Friday’s session.

The December and February CME hog contracts also ended limit-up. The CME will expand limits in lean hog futures for Friday’s session to 4.5 cents.

The market was jolted as the African swine fever case prompted South Korea, Germany’s second-largest pork customer outside the European Union, to ban German pork imports. Sales of German pork to top global buyer China and Japan are likely to come to a stop as well, German meat industry association VDF said.

“All of this should lead to more interest from abroad from U.S. pork, as ours is dirt cheap compared to the rest of the world,” said Dan Norcini, an independent livestock trader.

Domestically, the average U.S. negotiated cash hog price rose $2.46/cwt on Thursday, a jump of nearly $6 in two days, while the U.S. pork cutout value, an indication of wholesale prices, was up 73 cents/cwt on Thursday afternoon, according to the U.S. Department of Agriculture.

CME live cattle futures followed lean hog futures higher, despite declining cash cattle and wholesale beef prices. Cash cattle markets were subdued on Thursday after trades on Wednesday at $101/cwt, down $1-$2 from the bulk of last week’s trade.

“The cattle going higher was purely a function of the hogs going limit-up,” Norcini said.

CME October live cattle futures settled up 0.4 cent at 105.1 cents/lb. October feeder cattle ended up 1.35 cents at 139.6 cents/lb.

Traders await direction from USDA’s monthly supply/demand reports and weekly export sales data set for release on Friday. Analysts expect USDA to lower its estimates of U.S. corn and soybean production.

— Reporting for Reuters by Julie Ingwersen in Chicago.

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