Cattle Rise to Record, Hogs Gain on Shrinking Meat Supply

Hog futures extended a rally to an all-time high amid a spreading virus that kills piglets, leaving Americans poised to pay more for pork this year.

More than 4 million pigs have been killed by the porcine epidemic diarrhea virus, which has spread to at least 25 U.S. states, according to the National Pork Producers Council. The number of confirmed PED cases has surged in 2014, reaching 3,253 as of Feb. 16, according to a report prepared by the National Animal Health Laboratories Network.

Consumers will pay as much as 3 percent more for pork this year, the government estimates, and higher prices may increase costs for retailers including Hormel Foods Corp. The U.S. Department of Agriculture on Feb. 10 reduced its 2014 pork production forecast by 0.7 percent and increase its outlook for hog costs. Futures have surged 27 percent this year, the biggest gain behind coffee among the 24 raw materials in the Standard & Poor’s GSCI Spot Index.

“There is going to be a shortage of pigs,” Mark Schultz, chief market analyst with Northstar Commodity Investments LLC in Minneapolis, said in a telephone interview. The PED virus is going “have a much greater effect going into the summer” as slaughter rates continue to decline and supplies shrink, he said.

Hog futures for April settlement rose 1.3 percent to $1.0825 a pound at 12:09 p.m. on the Chicago Mercantile Exchange, after reaching a record $1.0985. Prices rose as much as 3 cents, climbing by the exchange’s limit for a third straight session.

Pork-Chop Prices

Trading more than doubled compared with the 100-day average for this time, according to data compiled by Bloomberg.

Wholesale-pork prices surged 18 percent last month, the most since April 2010, and prices are 28 percent higher than a year earlier, government data show. Retail pork chops averaged $3.731 a pound in December, the highest since at least 1998, according to the latest data from the Bureau of Labor Statistics.

Meatpackers processed an estimated 18.416 million hogs this year as of Feb. 28, down 2.6 percent from a year earlier, USDA data show.

Investors are holding a net-long position in hogs of 65,506 contracts, the highest since November, U.S. Trading Commodity Futures Commission data show. Bullish bets have surged 60 percent this year, the government data show.

“The PED virus has impacted our internal farm operations and several of our independent hog suppliers,” Jeffrey Ettinger, chief executive officer of the Austin, Minnesota-based Hormel, said on a Feb. 20 conference call. “Based on the timing of the virus breaks in our supply chain so far, we anticipate tighter pork raw materials in the summer months.”

To contact the reporters on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net; Megan Durisin in Chicago at mdurisin1@bloomberg.net

To contact the editor responsible for this story: Millie Munshi at mmunshi@bloomberg.net

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