CHICAGO, July 9 (Reuters) - Chicago Mercantile Exchange (CME) lean hog futures roared higher on Tuesday, with the most-active August and October contracts settling up by the daily 3-cents-per pound limit on a mix of technical buying, firmer cash pork values and optimism about U.S. trade talks with China, traders said.
CME’s most-active August lean hogs contract ended up the 3-cent limit at 79.075 cents per pound, rallying after dipping to 75.500 cents, its lowest level since June 27. Front-month July finished 1.300 cents higher to settle at 71.375 cents per pound.
The CME Group said daily limits in lean hog futures will expand to 4.5 cents per pound for Wednesday’s trade.
The market drew support in part after the U.S. Department of Agriculture’s (USDA) mid-morning pork report showed the average carcass value up $3.70 per cwt, with values surging for pork bellies.
The government’s afternoon pork report, however, showed the average carcass value up only $1.89 per cwt.
“The wholesale pork market coming alive certainly did not hurt,” said Doug Houghton, analyst with Brock Associates Inc.
Lean hog futures also drew support from news that White House economic adviser Larry Kudlow said China was expected to move forward “quickly” with agricultural purchases from the United States.
China has been struggling with outbreaks of African swine fever in its hog herd, the world’s largest, but so far the country’s purchases of U.S. pork have fallen short of traders’ hopes.
“There’s been some talk that (China’s) pork stocks will be running low and that they would be increasing purchases,” Houghton said.
Lean hog futures were also technically oversold by some measures and primed for a rally following an aggressive sell-off in recent days. The CME October contract on Tuesday dipped to 67.425 cents, its lowest level since February, before turning higher.
CME live cattle futures followed the strength in lean hogs to end higher, shaking off sluggish wholesale beef values.
August live cattle settled up 1.975 cents at 108.125 cents per pound after touching 108.425, the contract’s highest since May 31. October live cattle ended up 1.900 cents at 109.300 cents.
CME August feeder cattle futures rose 3.975 cents to finish at 142.875 cents per pound, drawing additional strength from a setback in Chicago Board of Trade corn futures.
Cash beef values were soft. The USDA quoted choice boxed beef cutout on Tuesday at $214.73 per cwt, down $2.73 from Monday, while select cutout fell $2.32 to $192.09.
“It looks to me like Independence Day beef clearance was not good,” Houghton added. (Reporting by Julie Ingwersen, editing by G Crosse)