Chicago | Reuters – Chicago Mercantile Exchange (CME) livestock futures ended the day mixed, with a lack of buying interest and light cash trade prompting dealers on Wednesday to sell their nearby live cattle contracts and buy the deferred months, traders said.
Meanwhile, hog traders also took a cue from the cash market, as signs of an easing between that market and futures finally started to emerge, traders said.
Hog futures have surged in recent weeks due largely to the livestock market’s expectations for increased demand for U.S. pork from China, the world’s top importer, traders said.
It might seem an unlikely time for U.S. farmers to look to China for more business, but the devastating impact of African swine fever on the Chinese pork industry is trumping concerns about trade wars and tariffs.
Experts estimate the disease will wipe out about a third of China’s pork production this year, or 18 million tonnes. That is twice the amount of pork exported worldwide every year and enough to feed U.S. consumers for almost two years.
“While China has been turning to Argentina for hogs to satisfy demand, that does create a void in the global market for the U.S. to supply,” said Karl Setzer, a commodity market risk analyst with AgriVisor.
“So like soybeans, the market thinks that China will inevitably need to come to the U.S. for pork supplies,” Setzer said. “But it also could mean that the U.S. will see non-traditional buyers also coming to us for pork.”
But CME hog futures did face pressure on Wednesday by news that slaughter weights were on the rise to a seasonally expected level, as temperatures across the United States eased.
Traders said that they would be keeping a close eye on U.S. Department of Agriculture’s weekly export sales report on Thursday, and looking specifically for signs of China buying pork products.
“If we don’t see some Chinese purchases in that export report tomorrow, then I think you could see a correction in the hogs happen pretty quickly,” said Jeff French, an analyst with Top Third Ag Marketing in Chicago.
CME August lean hog futures closed the day up 0.375 cent at 86.55 cents per pound, while October hogs settled down 0.95 cent to 80.85 cents.
CME August live cattle futures closed down 0.15 cent at 108.9 cents per pound. CME October cattle rose 0.025 cent to 109.9 cents per pound.
CME August feeder cattle futures settled the day up 0.625 cent to 142.825 cents per pound. September feeders edged up 0.425 cent to 142.875 cents per pound.