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US hog futures slip as supply outweighs Chinese demand

US hog futures dropped on Friday (27 December) as pressure from large domestic supplies overshadowed an uptick in pork sales to China.

30 December 2019, at 11:44am

Traders are keeping an eye on Chinese demand because China, the world's biggest pork consumer, is grappling with African swine fever. Farmers are hoping China will further increase imports of US pork to make up for the outbreak that has decimated its herd.

China was the biggest buyer of US pork for delivery in 2020 last week, according to US Department of Agriculture data. The agency reported net export sales of 5,690 tonnes to China from 13 to 19 December for next year. The sales were the biggest for 2020 in about a month and came after three consecutive weeks of net cancellations by China.

Weekly shipments of 16,115 tonnes of US pork to China were the biggest since February, according to USDA data.

But US supplies of hogs remain ample after producers expanded herds. The USDA said in a quarterly report on Monday that the inventory of all US hogs and pigs on 1 December was 77.3 million head, up 3 percent from a year earlier.

"Monday's hogs and pigs report confirmed we'll have larger than needed supplies through February," said Rich Nelson, chief strategist for commodities broker Allendale in Illinois.

Most actively traded February lean hog futures fell 0.325 cent to 70.575 cents per pound at the Chicago Mercantile Exchange. The contract pulled back after reaching its highest price since 13 December on Thursday.