Hogs, Soy, Cotton Soar as China Looks to Step Up U.S. Imports

(Bloomberg) --

Hog futures surged in Chicago as optimism grows that China, the world’s biggest pork consumer, will boost imports of American meat in a bid to ease trade tensions with the U.S. ahead of talks next month.

Soybeans and cotton futures also rose sharply, lifted by expectations that China would resume buying U.S. commodities.

Trump administration officials have discussed offering a limited agreement that would delay and even roll back some U.S. tariffs in exchange for Chinese commitments on intellectual property and agricultural purchases, according to people familiar with the matter. President Donald Trump appeared to confirm the goodwill purchases, which could also include soybeans, tweeting Thursday that China is expected to buy “large amounts of our agricultural products!”

Beijing is looking to accelerate pork shipments as it grows increasingly concerned about soaring prices, according to people with knowledge of the plans. African swine fever has killed millions of hogs in China and elsewhere in Asia, increasing the need for imports.

The spread of the pig-killing disease in Asia is “a once-in-a-lifetime opportunity,” according to the National Pork Producers Council.

“The pork producers in this country would like to have the level playing field for that opportunity,” said David Herring, the council’s president and a hog farmer from Lillington, North Carolina, said at an event on Thursday.

Hog futures for December climbed by their daily 3-cent-a-pound limit, or 4.9%. Soybean futures also gained, rising as much as 3.4% amid optimism for a pickup in U.S. sales that have lagged behind as the trade war dragged into a second year. December cotton futures jumped as much as 5%.

“Ags are well-supported on perceived China trade talk progress,” Arlan Suderman, chief commodities economist at INTL FCStone in Kansas City, said in an emailed report.

Even prior to the gesture, China resumed purchases of U.S. pork. In the week ended Sept. 5, exporters sold 10,900 tons of American pork to China, U.S. Department of Agriculture data showed Thursday. That’s the biggest order since late May.

Still, a healthy level of skepticism remains in the market after previous rounds of goodwill purchases.

“The US-China relations are similar to a couple I knew in college who only experienced good times when getting over a spat,” said John Payne, a senior broker and market strategist with Daniels Trading in Chicago. “We are in one of those modes right now between the two countries. Will it hold? Wake me up when they get married.”

“I would be using this rally to catch up sales for soy and cotton,” Payne said.

--With assistance from Dominic Carey, Patrick McKiernan, Isis Almeida and Mike Dorning.

To contact the reporter on this story: Michael Hirtzer in Chicago at mhirtzer@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Millie Munshi, Patrick McKiernan

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