U.S. livestock: CME lean hogs rise on China trade optimism

Chicago | Reuters — Chicago Mercantile Exchange lean hog futures closed higher on Wednesday for a second straight session on hopes that U.S. trade talks with China, at a time of surging Chinese pork prices, could bolster U.S. pork exports, traders said.

CME December lean hog futures settled up 2.075 cents at 69.475 cents/lb., just under technical resistance at the contract’s 100-day moving average near 70 cents (all figures US$).

Top U.S. and Chinese trade and economic officials will meet in Washington on Thursday and Friday to try to end a 15-month-old trade war that is slowing the global economy and threatens to upend decades-old trade systems. Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are due to take part.

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“If we reach an agreement, certainly they (the Chinese) are going to buy more U.S. beef and more U.S. pork, particularly pork,” said Brian Hoops, analyst with Midwest Market Solutions.

The trade talks come at a time when China, the world’s largest pork consumer, is struggling with outbreaks of African swine fever, a devastating pig disease. China’s hog herd fell by half in the first eight months of 2019 and will likely shrink by 55 per cent by the end of the year, analysts at Rabobank said last week.

In an effort to replenish its herd, one of China’s top pig farming companies imported 906 breeding pigs from Denmark this week, China’s customs said, the first import of live pigs in a year.

CME cattle markets closed higher as well, with feeder cattle futures jumping to multi-month highs.

Most-active November feeder cattle futures settled up three cents at 144.25 cents/lb. after reaching 145.575 cents, the contract’s highest since May 24.

CME December live cattle futures ended up 0.325 cent at 111.175 cents/lb. after notching a two-month top at 112.2 cents.

“We’ve seen a very strong rally in hogs and feeder cattle today, and live cattle is just a follower at this point,” Hoops said.

Cattle futures drew support from last week’s stronger cash trade and a winter storm forecast in the northern U.S. Plains that could dump up to one metre of snow in North Dakota and send temperatures plunging into the 20s F (-1 to -7 C) in Nebraska, western Iowa, southwest Minnesota and the Dakotas.

Traders also await direction from monthly crop reports due Thursday from the U.S. Department of Agriculture. Analysts surveyed by Reuters on average expect the government to lower its estimates of U.S. 2019 corn and soybean production.

— Julie Ingwersen is a Reuters commodities correspondent in Chicago.

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