October 15, 2019 / 10:51 PM / a month ago

LIVESTOCK-Lean hog futures surge on optimism about Chinese pork demand

CHICAGO, Oct 15 (Reuters) - U.S. lean hog futures hit a two-week high on Tuesday, with the benchmark December contract rising its daily limit of 3 cents per pound on optimism about increasing pork demand from China, traders said.

Food prices in China have soared, driven mainly by a sharp increase in pork values after deadly African swine fever spread through China’s huge hog herd, the government said on Monday.

“Lean hog futures are strong today on expectations of rising Chinese imports. China’s official data shows that hog numbers are down 41%, while industry sources from within China tell us they are down 60 to 70%,” INTL FCStone chief commodities economist Arlan Suderman wrote in a client note.

Chicago Mercantile Exchange December lean hog futures settled up their 3-cent limit at 72.125 cents per pound while February hogs ended up 1.900 cents at 79.150 cents.

The CME Group said limits for Wednesday’s trade would expand to 4.5 cents per pound.

Chinese firms have already purchased 700,000 tonnes of pork from the United States this year to meet market demand, a foreign ministry spokesman said on Tuesday, although U.S. government data pointed to smaller pork sales.

Weekly U.S. Department of Agriculture (USDA) export sales data indicates recent buying has lifted China’s pork purchase total to around 300,000 tonnes for shipment this year and about 135,000 tonnes for delivery in 2020.

The divergent data from China and the United States added to confusion in the U.S. livestock market over whether the USDA’s closely followed weekly U.S. export sales data includes hog carcasses, which are preferred by Chinese importers over other cuts.

“There’s been a lot of confusion out there about whether carcasses are covered or are not covered,” a USDA official who was not authorized to speak to the press told Reuters on the sidelines of a USDA data users meeting in Washington on Tuesday.

“What’s covered is muscle cuts. Whether people interpret that as including carcasses or not is a question that’s out there that we want to clarify,” said the official, who asked not to be named.

CME live cattle futures were steady to higher on Tuesday, with the most-active December contract ending flat as the market paused following a five-week rally.

December live cattle settled unchanged at 113.450 cents per pound after matching Monday’s 2-1/2 month high of 113.725 cents, at the contract’s 200-day moving average.

CME November feeder cattle futures ended unchanged on the day as well, settling at 146.075 cents per pound.

Firm cash markets and rising wholesale beef prices lent support to cattle futures. The USDA quoted choice boxed beef cutout on Tuesday afternoon at $218.02 per cwt, up 80 cents from Monday, while select cutout rose $2.15 to $191.48.

Reporting by Julie Ingwersen Editing by Sonya Hepinstall

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