Hog Futures Post Biggest Weekly Drop Since August 2009

Hog futures posted the biggest weekly decline in more than four years as confirmed cases of a piglet-killing virus slowed amid speculation that high pork prices are eroding demand.

The U.S. inventory of swine that farmers plan to sell for slaughter declined less than forecast by analysts in the three months through March 1, government data showed on March 28. Yesterday, wholesale pork tumbled 2.9 percent, the most in 13 weeks, according to U.S. Department of Agriculture figures.

In the first quarter, hog futures surged 49 percent, the most in 15 years, as porcine epidemic diarrhea virus spread to at least 27 states, eroding supply prospects. More than 5,000 cases of the disease have been confirmed in the past 12 months, according to the National Animal Health Laboratory network. Last week, the number of cases rose by 247, the smallest increase since January, the latest data show.

“The hogs and pigs report Friday was the first indication that PED, while very real, is not devastating the pork herd,” Lawrence Kane, a market adviser at Stewart-Peterson Group in Yates City, Illinois, said in a telephone interview. “And now, the retailer just doesn’t see the demand at those kind of price levels.”

On the Chicago Mercantile Exchange, hog futures for June settlement fell by the limit of 3 cents, or 2.4 percent, to close at $1.2055 a pound at 1 p.m. This week, the price tumbled 7 percent, the most since August 2009.

The number of so-called market hogs fell 3.7 percent as of March 1 from a year earlier, the USDA said last week. Analysts surveyed by Bloomberg projected a 6.1 percent drop on average.

Chinese Restrictions

China, the world’s largest pork consumer, placed “temporary restrictions” on imports of U.S. pigs to prevent the virus from spreading to its herds, according to the Livestock Exporters Association of the USA, an industry group.

“There is no ban in place, just testing and certification that we will provide so that trade continues unimpeded,” Ed Curlett, a spokesman at the USDA’s Animal and Plant Health Inspection Service, said in an e-mail. China is asking for animals from a herd free of the virus, and the agency is “both capable and willing to do this work,” he said.

‘Adding Pressure’

The step by China is “adding to the pressure” on prices, Sterling Smith, a futures specialist at Citigroup Inc. in Chicago, said in an e-mail.

China imported about 17,000 live pigs in 2013, according to data tracked by Ma Chuang, a partner at Beijing Boyar Communication Co., an animal-husbandry research company.

China had a pig-virus outbreak in 2011, he said.

While China’s move may be contributing to the price drop “on a psychological basis,” the total number of live hogs that the U.S. exports is small, Doug Houghton, an analyst at Brock Associates Inc. in Milwaukee, said in an e-mail.

U.S. exporters shipped 34,004 hogs last year with 13,653 going to China, USDA data show.

Bacon costs may rise to a record this year, said Ron Plain of the University of Missouri. On April 2, the wholesale price of pork bellies, cured and sliced to make bacon, rose to an all-time high of $2.0247 a pound, USDA data show.

“This week’s bellies become bacon a few weeks down the road in grocery stores,” Plain, a livestock economist who has studied the market for three decades, said in a telephone interview. “It’s likely that grocery store bacon prices are going to continue to move higher.”

To contact the reporter on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net

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

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