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CME update: lean hog futures in an extended decline

US lean hog futures drop lower on large supplies from rebounding pork production.

12 June 2020, at 9:31am

Reuters reports that traders expect meat packers will have an abundance of hogs to slaughter after livestock backed up amid meat plant closures this spring. Processing plants closed in April and May due to COVID-19 outbreaks among workers, causing producers to keep market ready hogs on farm.

Though many plants have resumed operations, many are operating at reduced capacity.

"We have a lot of hogs to work through," said Brian Hoops, president of US broker Midwest Market Solutions.

The US Department of Labour reported that meat prices surged 40.4 percent in May as plant shutdowns and slowdowns from COVID-19 limited production.

In the USDA monthly report, forecasts for 2020 red meat and poultry production increased. The agency cited "a faster-than-anticipated recovery in the pace of slaughter" of hogs and cattle.

Chicago Mercantile Exchange July lean hog futures, the most actively traded contract, slid 0.675 cent to 52.125 cents per pound. August futures dropped 0.950 cent to 54.875 cents.

"We're not going to get into a situation where we have smaller supply that would force the market higher," Hoops said. "We think rallies should be sold."

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