US hog prices jump as China offers tariff waivers

US hog futures rose to their highest price in more than two weeks on Friday on renewed hopes for a trade deal with Beijing and for increased pork sales to China, traders said.

9 December 2019, at 10:30am

China said it will waive import tariffs for some US soybean and pork shipments as the two countries try to thrash out an agreement to defuse their protracted trade war.

A trade deal could increase US pork sales to China as Beijing has imposed levies of up to 72 percent on American pork in response to tariffs launched by Washington.

But some industry sources in the United States and China interpreted waiver announcement as official confirmation of duty exemptions on up to 10 million tonnes of soybeans and an unknown volume of pork that sources said Beijing offered to importers earlier this year.

"We shot a lot higher off the tariff reports early in the morning, then faded off of it," a commodity broker said.

Lean hogs for February delivery ended down 0.025 cent at 67.550 cents per pound at the Chicago Mercantile Exchange (CME). The contract reached its highest price since 19 November before pulling back.

"The buying conviction has been pretty weak in hogs," the broker said.

China has been scouring the world for more meat to fill a shortage of protein after an outbreak of a fatal pig disease, African swine fever, devastated its massive hog herd and reduced pork supplies.

But China's tariffs give rival suppliers in Europe and South America an advantage in sales over the United States, which has a record-large hog herd.

The US Meat Export Federation said it was seeking more details on China's tariff waivers.

"The retaliatory duties have definitely been a barrier for US pork and any relief will be welcome," said Joe Schuele, spokesman for the industry group.

Margins for meat packers rose to $66.80 per head for hogs from $65.95 on Thursday, but were down from $71.15 a week ago, according to livestock marketing advisory service Margins eased to $171.05 per head of cattle from $185.65 on Thursday and $265.20 a week ago.

Packers are expected to slaughter 2.8 million hogs through Saturday this week, up from 2.6 million a year ago, according to the US Department of Agriculture. They will slaughter 679,000 cattle, up from 669,000 a year earlier.