U.S. livestock: CME hogs limit up as trade tensions cool

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

Chicago | Reuters — Chicago Mercantile Exchange (CME) lean hog futures jumped Monday as U.S. President Donald Trump predicted a trade deal with China after positive gestures by Beijing.

Signs of cooling trade tensions supported the market, traders said, after China imposed retaliatory tariffs on imports of U.S. pork and other farm products last year as part of the trade war between the world’s two largest economies. The duties slashed U.S. agricultural exports to China, the world’s largest pork consumer.

China has the potential to significantly increase pork imports if a trade deal is reached because millions of its pigs have died in an outbreak of a fatal hog disease African swine fever, according to analysts.

Agricultural consultancy INTL FCStone projected Chinese pork meat imports will rise to 3.3 million tonnes in 2019 and 4.2 million tonnes in 2020 from 2.1 million tonnes in 2018 because of the African swine fever outbreak.

China’s agriculture ministry confirmed a new outbreak of the disease in the southwestern province of Yunnan on Monday.

CME October lean hogs settled up the daily 4.5-cent limit at 63.8 cents/lb. (all figures US$).

Helping to lift hog and cattle markets was news that Washington agreed in principle to core elements of a trade deal with Japan, traders said.

The agreement offers “better access to a critical and growing market for American beef and pork,” said the North American Meat Institute, which represents packers such as Tyson Foods and Cargill.

Before the trade war with China, Japan was the No. 3 export market for U.S. pork, behind Mexico and China/Hong Kong. Japan moved up to the No. 2 market in 2018 as China/Hong Kong cut imports due to rising trade tensions.

“Farmers and ranchers needed a win, and the preliminary agreement between the U.S. and Japan comes at a critical time,” said Barbara Glenn, chief executive of the industry group National Association of State Departments of Agriculture.

CME October live cattle futures settled up 1.6 cents at 101 cents/lb. October feeder cattle rose 1.85 cents to 134.375 cents/lb.

Cattle data issued on Friday by the U.S. Department of Agriculture underpinned futures, traders said. The agency said 1.71 million head were placed in feedlots in July, down two per cent from a year earlier.

Analysts polled by Reuters had expected placements to rise slightly.

— Reporting for Reuters by Tom Polansek in Chicago.

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