CHICAGO, June 21 (Reuters) - Hefty supplies of American pigs pushed Chicago Mercantile Exchange (CME) lean hog futures down by the daily exchange-imposed limit on Friday.
Prices tumbled as the U.S. Department of Agriculture reported that meat companies like Tyson Foods Inc and JBS USA slaughtered 462,000 hogs, up 9% from a year earlier. For the week, packers slaughtered about 2.4 million hogs, also up 9%.
Supplies have swelled after hog farmers expanded their herds in recent years and processors built new processing plants to turn hogs into bacon, pork chops and other products.
“We’ve been inundated with hog supplies,” said Rich Nelson, chief strategist for Illinois-based broker Allendale.
Chicago Mercantile Exchange July lean hog futures tumbled the daily 3-cent limit to 76.250 cents per pound. Most active August hogs sank 3 cents to 77.900 cents per pound.
CME will temporarily expand the limit to 4.5 cents on Monday after the sharp decline.
The supply glut has overshadowed expectations that China will ramp up pork imports later this year and in 2020 to compensate for millions of hogs that have died in outbreaks of a fatal hog disease called African swine fever.
Some U.S. farmers had been keeping hogs on their farms longer than normal, instead of delivering them to packing plants, in anticipation that prices would rise because of China’s African swine fever problem, Nelson said. But they are now delivering those hogs to slaughterhouses, he said.
“Producers got bullish in April and May. Now we’re paying for it,” Nelson said.
China, the world’s top hog producer and pork consumer, has reported more than 120 outbreaks of African swine fever since it was first detected in the country in early August 2018.
The southwestern province of Guizhou reported new outbreaks in two villages, China’s agriculture ministry said.
In the cattle market, futures could come under pressure on Monday after the USDA reported that more cattle were placed in feedlots in May than analysts expected, traders said.
Placements totaled 2.06 million head, down 3% from 2018. Analysts were expecting about 2.04 million, according to a Reuters poll.
The USDA also said there were 11.7 million head of cattle in feedlots on June 1, in line with analysts’ expectations. That was the highest June 1 inventory since the agency began tracking the data in 1996.
CME most-active August live cattle dropped 1.725 cents to 102.225 cents per pound.
CME August feeder cattle dropped 1.025 cents to 133.675 cents per pound.
Cash cattle traded at $110 per cwt in Kansas and Texas this week, down $2 from last week, traders said.
Reporting by Tom Polansek in Chicago Editing by Susan Thomas