CHICAGO, Sept 3 (Reuters) - U.S. lean hog futures surged their daily limit on Tuesday on a mix of fund-driven buying and renewed optimism about Chinese demand for pork as the Asian country struggles with outbreaks of African swine fever in its massive hog herd, traders said.
Retail pork prices in China hit a record in early August and rose to a national average of 35.12 yuan per kg in the week ending Aug. 21, data from the Ministry of Agriculture and Rural Affairs showed, up 57% from a year earlier.
News of the price hikes rekindled expectations of pork imports by China, by far the world’s biggest consumer. China’s commerce ministry said last week it would release frozen pork, beef and mutton from state reserves in “due course” to increase the supply of meat on the market.
“What China is going through is friendly to every protein in the world,” said Jeff French, analyst with Top Third Ag Marketing in Chicago.
CME October lean hog futures settled up the daily 3-cent limit at 66.525 cents per pound. Daily limits for Wednesday will expand to 4.5 cents per pound, the CME Group said.
Bargain-hunting by funds and other investors may have lent support on the first trading day of the new month. October hog futures fell 10.5% during August, making the contract appear technically oversold to some.
“Fresh money (is) being put to work on the long side,” French said, adding, “From a chart standpoint, this is a very good way to start out September.”
However, expectations of aggressive U.S. hog production in the fourth quarter could keep a lid on rallies.
CME live cattle futures closed higher on Tuesday, following strength in lean hogs as well as a bounce in feeder cattle futures as Chicago Board of Trade corn prices fell to contract lows.
CME October live cattle futures settled up 0.350 cent at 99.275 cents per pound and December live cattle rose 0.650 cent to 104.325 cents, after posting a contract low on Friday.
October feeder cattle rose 1.300 cents to 132.100 cents per pound.
Reporting by Julie Ingwersen in Chicago Editing by Matthew Lewis