US hog futures look bright going into 2020

US hog futures kicked off 2020 by approaching seven-week highs in gains driven by increasing expectations for bigger sales of American pork to China.

3 January 2020, at 10:10am

China, the world's largest pork consumer, needs larger imports to offset a domestic meat shortage caused by the outbreak of African swine fever. American farmers hope China will increasingly turn to the United States for pork after Washington and Beijing sign an initial deal to ease their bruising trade war.

US President Donald Trump said on Tuesday that a Phase 1 trade deal with Beijing would be signed on 15 January. It includes a commitment by China to buy more American agricultural products, although details have not been announced.

"There's still a rising feeling of confidence about a signing and there's still hope that this will result in some stronger export numbers in the year ahead," said Rich Nelson, chief strategist for US broker Allendale.

Most actively traded February lean hog futures rose 0.125 cent to 71.550 cents per pound at the Chicago Mercantile Exchange. The contract reached its highest price since 15 November.

African swine fever has reshaped global meat markets by pushing China to search the world for meat to replace millions of dead pigs.

meat displayed in a refrigerator at a supermarket

The United States has been at a disadvantage to other suppliers since last year because Beijing imposed retaliatory tariffs on imports of American pork as part of the two countries' trade war.

US farmers hope China eliminates its retaliatory tariffs or issues more waivers to tariffs. They have hefty inventories after expanding herds to record-large numbers last year.

"You haven't seen the wave of pork demand that it would take on the trade front to get the market really excited," a commodities broker said. "With the expanded hog herd, we need to move it."

In the cash market for pork, prices increased for carcasses, loins, butts and ribs, according to US Department of Agriculture data.

Traders on Friday will review weekly USDA export sales data for pork and beef.