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CME update: lean hog futures end higher, but post a 2 percent decline for the year

US lean hog futures closed higher on 31 December, buoyed by fund-driven buying, strong weekly export sales data and optimism about consumer demand for pork in the coming months.

1 January 2021, at 7:55am

US markets will be closed on 1 January for New Year’s Day.

Reuters reports that CME February lean hogs climbed 2.675 cents to settle at 70.275 cents per pound.

The US meat industry was challenged in 2020 as the COVID-19 pandemic sickened workers and forced numerous US slaughterhouses to shut down in the spring, creating backlogs of cattle and hogs. For the year, lean hogs fell about 2 percent, while grains and metals advanced.

The relative weakness in livestock futures may be attracting speculators.

"There is a lot of money that has been on the side lines, that is taking a look at commodities as an asset class ... These guys look are looking for bargains, and they are finding them in the livestock markets," said Dan Norcini, an independent trader.

"I think you are seeing hedge funds and index funds start to position for what they expect to be higher livestock prices next year," Norcini said.

Strong export data lent support. The US Department of Agriculture reported export sales of US pork in the week ended 24 December at 54,000 tonnes (old and new marketing years combined), with China booking 24,300 tonnes.

"US pork is still cheap. The dollar is weakening. So there is no reason not to expect pork and beef demand to be strong next year," Norcini said.

The US pork carcass cut-out value rose $5.93 on Thursday afternoon to $78.58 per cwt, according to the USDA.

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