October 22, 2019 / 10:51 PM / 2 months ago

LIVESTOCK-Lean hogs drop on burdensome supply, export jitters

CHICAGO, Oct 22 (Reuters) - U.S. lean hog futures slumped on Tuesday, pressured by abundant near-term hog supplies and concerns that U.S. pork export demand would not be large enough to absorb the expected surplus of meat produced.

Hopes for a jump in Chinese demand for U.S. pork have supported hog futures at times in recent months. China’s demand for imported pork has risen this year as a deadly hog disease known as African swine fever has decimated its domestic herd.

But U.S. shipments to the world’s top pork consuming country have been largely disappointing and steep retaliatory tariffs on U.S. shipments remain in place.

Meanwhile, massive U.S. hog supplies have weighed down cash hog prices, which are at a large discount to futures.

The average cash hog price in the closely followed Iowa and southern Minnesota market were down $1.04 per cwt on Tuesday at $56.35 per cwt.

Chicago Mercantile Exchange (CME) December lean hog futures , the most active contract, settled down 2.325 cents at 65.500 cents per pound.

“We have questions about the demand, while at the same time the supply looks ridiculously large,” said Rich Nelson, chief strategist with Allendale Inc.

“We see a 4.5% increase in fourth-quarter production. That’s an extra 1.1 billion pounds shoved onto this market. Any concerns about China not buying means we’ve got some mispricing in these December futures,” Nelson said.

CME live cattle futures ended mostly lower, with spot October futures dragged down by a wave of deliveries against futures which indicate futures are overpriced.

October live cattle ended down 1.075 cents at 109.875 cent per pound while actively traded December live cattle settled down 0.175 cent at 113.700 cents per pound.

CME November feeder cattle futures were up 0.650 cent at 143.500 cents per pound, while actively traded January was up 0.700 at 139.800 cents.

Cold storage data released by the U.S. Department of Agriculture after the close appeared supportive to both hogs and cattle due to declines in beef and pork stocks in September, normally a stock-building month.

Reporting by Karl Plume in Chicago; Editing by Richard Chang

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