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Lean hog prices fall as US pork sales to China disappoint

US lean hog futures tumbled on Thursday (21 June) as American pork export sales to China continued to disappoint traders who have been expecting a surge of demand due to an outbreak of a fatal hog disease in China.

21 June 2019, at 10:36am

Hog futures have pulled back 12 percent since reaching a five-year high last month on projections for China to ramp up pork imports as it struggles to contain cases of African swine fever.

China has reported more than 120 outbreaks of the deadly disease in all of its mainland provinces and regions, as well as Hainan Island and Hong Kong, since it was first detected in the country in early August 2018.

However, US pork export sales to China have turned out weaker than expected so far, in part because China has large inventories of pork in cold storage, traders said.

The US Department of Agriculture (USDA) reported a net reduction of 100 metric tonnes in American pork export sales to China in the week ended 13 June. Shipments of US pork to China increased to 5,800 metric tonnes, though.

"We are seeing a slow ramping up of shipments - not to the degree that the market has been anticipating - but it is starting to unfold," said Arlan Suderman, chief commodities economist for US-based broker INTL FCStone.

Chicago Mercantile Exchange July lean hog futures fell 2.375 cents to 79.250 cents per pound. Most active August hogs lost 2.1 cents to 80.900 cents per pound.

The US pork industry depends on export markets to consume extra supplies after American farmers expanded hog herds in recent years and meat companies built new processing plants.

Sales to China slowed after Beijing last year imposed a 62 percent retaliatory tariff on imports of US pork as part of its trade war with Washington.

However, analysts and traders said they still expect an increase in Chinese demand toward the end of 2019 and in 2020 due to African swine fever.