U.S. livestock: Lean hogs sink on big supply, premium to cash prices

Chicago | Reuters — U.S. lean hog futures fell on Thursday on ample supplies of hogs and a weak cash market, and as traders remain uncertain about how much additional pork China would buy as part of a Phase One trade deal with the United States.

The actively traded Chicago Mercantile Exchange (CME) February contract guided futures lower, pressured by its premium to the CME lean hog index, which is nearly nine cents below Thursday’s closing price.

Hog traders are looking ahead to next week’s Phase One trade agreement signing between the United States and China, the world’s top hog and pork market. U.S. officials say the deal would double Chinese purchases of U.S. farm goods.

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U.S. pork exports to China have been record-large in recent months as the country scrambles for supplies after African swine fever killed about half of China’s hog herd.

But investors remain tentative as Chinese imports of U.S. pork have, at times, been below market expectations.

“It is disappointing for the market to weaken on a day when China confirmed next week’s trade deal signing. But the market doesn’t really know what to expect in the way of pork buying by China,” said Doug Houghton, analyst with Brock Associates.

The U.S. Department of Agriculture is due to release updated weekly export sales data on Friday after a winter storm in Washington delayed the report’s release by a day this week.

CME February hogs fell two cents to 67.025 cents/lb., a near-one-month low but still well above the latest lean hog index of 59.34 cents.

Live cattle futures firmed on seasonally tight supplies and hopes for another week of higher cash market prices, though gains were kept in check by poor beef packer margins. Feeder cattle ended mixed.

Bids and offers at U.S. Plains feedlot markets remain far apart, but traders expect cash sales this week to be at least steady to possibly higher than last week’s $124/cwt market.

Average beef packer margins on Thursday fell to $3.15 per head, down from $6.35 on Wednesday and $28.75 a week ago, according to livestock marketing advisory service HedgersEdge.com LLC.

CME February live cattle closed 0.375 cent lower at 126.725 cents/lb., while March feeder cattle were 0.1 cent higher at 146.925 cents/lb.

— Karl Plume reports on agriculture and ag commodities for Reuters from Chicago.

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