CME hog futures climb on China pork imports resumption

 

 

Short covering and news that China has again allowed US pork back onto its shores helped to push CME hogs higher Wednesday (May 19).

 

Smithfield Foods Inc. said that China this week resumed imports of US pork that was banned in April 2009 in response to the AH1N1 flu outbreak, which was then commonly referred to as swine flu.

 

Another reason behind hogs' strong performance was speculative buyers who targeted June and July bullish price discounts to CME's lean hog index.

 

Pork futures moved higher in the face of bearish fundamentals and negative market outside influences including Tuesday's drop in wholesale pork prices, steady-to-lower cash hog prices Wednesday and the stock market's fall of nearly 2%.

 

Equities' near-term fate appears to be tethered to economic instability in Europe that could ultimately result in diminished overseas demand for expensive US products, including high-end pork items.

 

Wholesale pork prices Tuesday were down for a second straight day as retailers buy fresh pork on an as-needed basis while stocking meat cases for the upcoming US Memorial Day holiday.

 

In addition, packers are reluctant to raise bids for cash hogs, given estimated margins that slipped to US$7.98 Tuesday from US$9.72 Monday, partly due to diminished retail interest in fresh pork.

 

Spot-June finished 0.72 cent higher, or 0.9%, at 82.02 cents a pound. Nearby-July closed 1.10 cents higher, or 1.3%, at 82.97 cents. CME pork bellies closed sharply higher in low volume, and May ended limit up, on short covering and lean hog advances.

 

May ended 3 cents higher, or 2.9%, at 105.25 cents. July closed 1.20 cents higher, or 1.2%, at 100.95 cents.

 

Meanwhile, floor-traded CME live cattle settled flat to weak amid negative market fundamentals and uneasiness about equities that struggled to find equilibrium.

 

Spot-June and nearby-August live cattle slumped to seven-week lows at the start because traders were unsure what to make of this week's disappointing cash cattle price results versus futures' bullish price discounts to cash. Cash-basis cattle this week fetched US$96-98, compared with mostly US$100 last week.

 

June and August later stepped down after both months tripped sell orders that loitered below the market. Front-end cattle were also pressured by lower midday wholesale beef prices.

 

Nonetheless, cattle ended higher from morning lows after participants who searched for a market bottom stepped in when June and August approached 100-day moving-average support levels.

 

Spot-June live cattle closed down 0.32 cent, or 0.4%, at 92.42 cents a pound. Nearby-August finished unchanged at 91.52 cents. October ended down 0.15 cent, or 0.2%, at 92.70 cents.

 

Feeder cattle at the exchange settled mixed on spreading into May out of August. Live cattle's slight pullback also limited back-month feeder cattle buying interest.

 

Spot-May closed up 0.60 cent, or 0.5%, at 110.35 cents. Most-actively traded August finished unchanged at 112.57. September closed down 0.15 cent, or 0.1%, at 112.25 cents.