CHICAGO, Feb 6 (Reuters) - U.S. lean hog futures surged their daily 3-cent limit on Thursday after comments from a Tyson Foods Inc executive about pork demand from China ignited a wave of buying including short-covering, traders said.
Tyson is competing with other global companies to supply meat to China, the world’s largest pork consumer, as an outbreak of African swine fever has devastated the Chinese hog herd.
“We’re filling additional orders to China and we’ve seen year-over-year increases of nearly 600% in the first quarter,” Tyson Chief Executive Noel White told analysts on a conference call.
Benchmark April lean hog futures on the Chicago Mercantile Exchange (CME) settled up the 3-cent limit at 64.875 cents per pound. Limits for Friday’s trade will expand to 4.5 cents per pound.
“Tyson news of a 600% increase in Q1 pork sales to China had everyone foaming at the mouth,” said Dan Norcini, an independent livestock trader. “We need to remember, however, that number is coming from a very low base point,” Norcini added.
CME hog futures were primed for a rebound after the April contract fell 16% last week, pressured by an aggressive U.S. hog slaughter pace and fears that the coronavirus outbreak would slow China’s economy.
The Tyson CEO’s comment “hit a market that was extremely over-sold, and it just ran all the shorts out,” Norcini said of the strength in hog futures.
“It has probably snowballed on technical buying,” said Doug Houghton, analyst with Brock Associates.
CME live cattle and feeder cattle futures closed higher, led by the jump in lean hogs.
CME April live cattle futures settled up 0.575 cent at 119.750 cents per pound and front-month February rose 0.375 cent to close at 121.125 cents.
CME March feeder cattle futures rose 0.225 cents to end at 135.900 cents per pound.
The wholesale choice boxed beef cutout value rose 21 cents to $210.93 per cwt on Thursday while select cuts were down $1.98 at $205.96 per cwt, the U.S. Department of Agriculture said. (Reporting by Julie Ingwersen; editing by Grant McCool)