US hog futures recover on hopes for US-China trade deal

US hog futures shook off early losses to end positively this week as new negotiations spark hopes for an end to the US-China trade war.

10 May 2019, at 10:13am

US President Donald Trump said it was possible the United States could reach a trade deal with China this week, as two-day talks were set to begin in Washington.

American farmers and traders are paying close attention to the negotiations because China and Hong Kong were the second biggest export market for US pork prior to the start of the trade war.

Shipments of US pork to China declined after Beijing last year raised tariffs on imports from the United States to 62 percent as part of the tit-for-tat trade war.

"Trump indicated a trade deal can still be done," said Dennis Smith, broker for Archer Financial Services in Chicago. "This brought the hogs to life."

June lean hog futures closed 1.450 cents higher at 90 cents per pound at the Chicago Mercantile Exchange, after trading as low as 85.975 cents. July lean hogs settled up 0.225 cent at 90.975 cents, after touching its lowest price since 15 March at 87.850.

Traders remained nervous about the trade talks, though, because the United States is set to increase its tariffs on $200 billion in Chinese goods to 25 percent from 10 percent at 12:01 am EDT (0401 GMT) Friday (10 May). China is expected to retaliate.

US farmers have been waiting to see whether China will further increase purchases of US pork despite Beijing's existing tariffs.

China will need to boost total imports to make up for tens of millions of hogs killed in an outbreak of the fatal pig disease African swine fever, according to analysts.

Yet China bought only 800 tonnes of US pork in the week ended 2 May, out of total US export sales of 21,800 tonnes, the US Department of Agriculture said on Thursday (9 May).

"They're not coming to us right now to fill the gap" in supply left by African swine fever, a broker said.

CME June live cattle futures ended 0.875 cent higher at 111.950 cents per pound. August live cattle rose 0.200 cent to 107.600 cents per pound.

August feeder cattle advanced 0.600 cent to 144.475 cents per pound, while September feeder cattle closed up 0.425 cent at 145.275 cents.