U.S. livestock: Hogs sag on large supply, shrug off trade talks

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

Chicago | Reuters — U.S. hog futures slumped on Monday as concerns about mounting supplies overshadowed hopes that Washington and Beijing will resolve the trade war that has reduced shipments of U.S. pork to China.

U.S. President Donald Trump said on Sunday he would delay an increase in U.S. tariffs on Chinese goods thanks to “productive” trade talks. On Monday, Trump said he may soon sign a deal to end the trade war if U.S. and Chinese negotiators can bridge their remaining differences.

Such progress should help support hog futures because a resolution could increase U.S. pork exports to China, traders said. Beijing imposed tariffs on imports of U.S. pork last year as part of the dispute.

However, large numbers of hogs and low prices for pork weighed on the futures market, according to analysts.

“In the short term, there’s a fair amount of pork around us,” said Altin Kalo, agricultural economist for New Hampshire-based Steiner Consulting.

Chicago Mercantile Exchange April lean hogs, the front-month and most actively traded contract, fell 1.55 cents, to 53.9 cents/lb. (all figures US$).

U.S. farmers have ramped up hog production due to low prices for grains used for feed and as processing companies have built new plants to slaughter swine in recent years.

On Friday, the U.S. Department of Agriculture, in a report issued after the close of trading, said total supplies of frozen pork at the end of December were 505.287 million lbs., up from 490.047 million a year earlier.

The large supply eclipsed worries about cold temperatures and snow slowing the transportation of livestock to processing plants, said Brian Hoops, president of broker Midwest Market Solutions.

The wintry weather still helped boost futures prices for cattle, which typically do not gain weight as quickly in cold weather because they consume feed to generate body heat.

“A winter snowstorm should be friendly for hogs and beef both, and it was certainly friendly for the beef,” Hoops said.

Traders were also buying cattle futures and selling hog futures in spread trades, Hoops said.

“The fundamentals suggest a bigger supply of hogs, and the funds are going to keep slamming the hog futures and buying cattle against it as a spread,” he said.

Most-active CME April live cattle advanced 0.35 cent, to 129.225 cents/lb. March feeder cattle futures lost 0.4 cent, to 142.5 cents/lb., while deferred-month feeder cattle contracts ended higher.

— Tom Polansek reports on agriculture and ag commodities for Reuters from Chicago.

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