U.S. livestock: Fund selloff, NAFTA concerns extend hog losses

(Regis Lefebure photo courtesy ARS/USDA)

Chicago | Reuters — Chicago Mercantile Exchange lean hogs closed lower for a second straight day on Thursday, pressured by fund liquidation and jitters about NAFTA talks, said traders.

On Wednesday, Mexico said it would withdraw from the North American Free Trade Agreement (NAFTA) if the U.S. exits trade talks with Canada.

Mexico is the leading destination for U.S. pork with Canada ranked No. 4, according to industry data.

“The funds straight out liquidated the February contract. And I’m not hearing anything negative except concerns about the NAFTA issue,” said Tom Cawthorne, director of commercial agriculture with Hehmeyer Trading + Investments.

Packers competed for supplies to round out the first week of slaughters since the Christmas and New Year’s holidays, said traders and analysts.

Cash prices face challenges with some U.S. plants closing for Monday’s Martin Luther King Jr. holiday. A few processors may pay less for supplies after the recent run-up in hog prices shrunk their margins.

On Thursday, the U.S. Department of Agriculture’s export sales report showed U.S. pork exports for the week ended Jan. 4 at 12,500 tonnes in the current marketing year. Outstanding sales from Dec. 31 totaled 84,700 tonnes.

February hogs settled down 1.55 cents/lb. at 70.975 cents (all figures US$). April ended 1.95 cents lower at 73.825 cents.

Live cattle futures gain

Short-covering and bargain buying pared some of CME live cattle futures’ recent losses, said traders.

They said cold weather and snow in the U.S. Plains encouraged futures buyers. Frigid weather slows livestock weight gains while snow and ice could make it hard to transport animals to market.

February live cattle finished up 0.2 cent/lb. at 117.075 cents. April ended up 0.2 cent lower at 118.875 cents.

Investors look forward to next week’s slaughter-ready, or cash, cattle trade.

Since late last week, packers paid $118-$120/cwt for cash cattle in the U.S. Plains that a week earlier brought $123.

Bullish traders believe much-improved packer margins might encourage packers to pay more for supplies next week.

Market bears look for increased supplies and weaker wholesale beef values to pressure cash prices.

USDA’s export sales report put U.S. beef exports for the latest week at 14,600 tonnes. Outstanding sales at the end of 2017 totaled 38,200 tonnes.

Sell stops and the prospect of increased supplies ahead weighed on CME feeder cattle contracts.

January feeder cattle closed 0.55 cent/lb. lower at 143.825 cents.

— Theopolis Waters reports on livestock markets for Reuters from Chicago.

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