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LIVESTOCK-CME lean hogs fall as U.S. pork sales to China disappoint

Tom Polansek

CHICAGO, June 20 (Reuters) - U.S. lean hog futures tumbled on Thursday 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.

Live cattle and feeder cattle futures also declined.

Hog futures have pulled back 12% 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, U.S. 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 U.S. Department of Agriculture (USDA) reported a net reduction of 100 metric tons in American pork export sales to China in the week ended June 13. Shipments of U.S. pork to China increased to 5,800 metric tons, 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 U.S.-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 U.S. 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% retaliatory tariff on imports of U.S. 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.

On Friday, cattle traders will digest a monthly Cattle on Feed report from the USDA. Analysts estimate that placements of cattle in feedlots in May fell 4.2% from a year earlier, according to a Reuters poll.

CME most-active August live cattle slipped 0.600 cent to 103.950 cents per pound.

CME August feeder cattle dropped 1.825 cents to 134.700 cents per pound. (Reporting by Tom Polansek in Chicago Editing by James Dalgleish)

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