CHICAGO, Jan 15 (Reuters) - U.S. lean hog futures on the Chicago Mercantile Exchange (CME) inched higher on Wednesday as the United States and China signed a Phase 1 trade agreement that could lead to increased sales of U.S. meat to the world’s biggest pork consumer.
However, gains in futures were muted by a lack of specific details in the agreement about Chinese purchases, traders said.
China committed to additional purchases of U.S. agriculture products by $32 billion over two years, the deal said, including $12.5 billion above the corresponding 2017 baseline of $24 billion in 2020 and $19.5 billion above the baseline in 2021.
But the agreement did not list volumes by commodity, and it said market conditions may dictate the timing of purchases.
CME February lean hog futures settled up 0.200 cent at 67.875 cents per pound. The April contract ended down 0.025 cent at 74.975 cents a pound, while deferred contracts posted bigger gains, with June hogs up 0.675 cent at 87.500 cents.
“The expectation is that (Chinese buyers) are going to start ramping up business, and it’s going to benefit the back months, the summer hogs,” said Dan Norcini, an independent trader.
“But we are not getting a runaway move higher because we need to see some purchases take place,” Norcini added.
Nearby February and April hog futures were pressured by an aggressive U.S. slaughter that has neared half a million head each day this month, according to the U.S. Department of Agriculture.
Still, Norcini noted that wholesale pork prices have held steady in recent days despite the active kill. The U.S. pork cutout rose $0.36 late Wednesday to $74.65 per cwt and is up more than $2 from Friday, indicating decent demand.
CME live cattle futures declined in subdued trade as brokers waited to see where live cattle would trade in the cash market.
CME February live cattle fell 0.250 cent to settle at 126.600 cents per pound and April cattle ended down 0.375 cent at 127.500 cents per pound.
At the weekly Fed Cattle Exchange online auction, 435 cattle sold out of 744 head offered at an average price of $124.22 per cwt, according to the auction website, at a slight discount to February futures.
Live cattle futures should continue to grind sideways unless beef packers start paying more for cattle in the cash market, said Alan Brugler, president of Brugler Marketing & Management.
“If the packer needs cattle, he is going to pay up to get them. But we are not sure how bad he needs them,” Brugler said, noting recent weakness in wholesale beef prices.
“We need the country to pay up. If not, the board (futures) can’t go anywhere,” Brugler said.
CME feeder cattle futures fell for a third straight session, with March down 0.550 cent at 145.125 cents per pound.
Reporting by Julie Ingwersen; Editing by Richard Chang
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