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Lean Hogs Futures Peaking on Chinese Pork Demand

June 20, 2016 at 19:03 by Brent Lantzy

The August lean hog contract on the Chicago Mercantile Exchange stood down 0.250 cents at 88.925 cents per pound as of 18:20 GMT on Monday, down from the peak of 90.425 cents per pound touched on Wednesday of last week. The July contract was up by 0.275 cents to 86.450 cents per pound, and the October contract rose 0.125 cents to 74.450 cents per pound by 18:20 GMT.

Lean hogs futures have had a remarkable year, having risen nearly 50% in 2016.

Strong demand in China coupled with dwindling domestic supplies there have contributed to the rise as European and US farmers have worked to expand their herds.

In an interview with The Farmer’s Exchange, Purdue University Extension economist Chris Hurt explains:

In 2014, Chinese pork producers reduced herds due to poor margins. Now there is a shortage of pork, resulting in record-high retail prices. China’s pork imports have been growing and China will likely displace Japan as the world’s top pork importer this year.

Speculators have reached the highest level of net long positions since October 2014 at 62,609 open positions as of June 14, according to data from the US Commodity Futures Trading Commission.

The USDA will release their quarterly hog inventory survey data on Friday June 24. The previous data from March indicated that slaughter volume in July and August would be below the year-earlier levels. Pork exports to China are expected to grow 55% in 2016 over 2015 levels, according to data from Steiner Consulting Group obtained by Barron’s.

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