Pig prices climb as US-China trade tension cools down

Chicago Mercantile Exchange (CME) lean hog futures jumped Monday as US President Donald Trump predicted a trade deal with China after positive gestures by Beijing.

27 August 2019, at 9:25am

Signs of cooling trade tensions supported the market, traders said, after China imposed retaliatory tariffs on imports of US pork and other farm products last year as part of the trade war between the world's two largest economies. Reuters reports that the duties slashed US agricultural exports to China, the world's largest pork consumer.

China has the potential to significantly increase pork imports if a trade deal is reached because millions of its pigs have died in the ongoing outbreak of African swine fever, according to analysts.

Agricultural consultancy INTL FCStone projected Chinese pork meat imports will rise to 3.3 million tonnes in 2019 and 4.2 million tonnes in 2020 from 2.1 million tonnes in 2018 because of the African swine fever outbreak.

China's agriculture ministry confirmed a new outbreak of the disease in the southwestern province of Yunnan on Monday (26 August).

CME October lean hogs settled up the daily 4.5 cent limit at 63.800 cents per pound.

Helping to lift hog and cattle markets was news that Washington agreed in principle to core elements of a trade deal with Japan, traders said.

The agreement offers "better access to a critical and growing market for American beef and pork," said the North American Meat Institute, which represents packers like Tyson Foods and Cargill Inc.

Before the trade war with China, Japan was the No. 3 export market for US pork, behind Mexico and China/Hong Kong. Japan moved up to the No. 2 market in 2018 as China/Hong Kong cut imports due to rising trade tensions.

"Farmers and ranchers needed a win, and the preliminary agreement between the US and Japan comes at a critical time," said Barbara Glenn, chief executive of the industry group National Association of State Departments of Agriculture.

CME October live cattle futures settled up 1.600 cents at 101.000 cents per pound. October feeder cattle rose 1.850 cents to 134.375 cents per pound.

Cattle data issued on Friday by the US Department of Agriculture underpinned futures, traders said. The agency said 1.71 million head were placed in feedlots in July, down 2 percent from a year earlier.

Analysts polled by Reuters had expected placements to rise slightly.