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Pork Bellies Surge to Record as Hog Prices Tumble; Cattle Gain

Aug. 5 (Bloomberg) -- Pork-belly futures surged to a record $1.185 a pound after a plunge in U.S. inventories of the meat, which is used to make bacon. Hogs dropped the most in a year, and cattle gained.

In the past year, pork-belly inventories monitored by the Chicago Mercantile Exchange have tumbled 73 percent after losses in 2008 and 2009 spurred farmers to cut breeding herds close to the lowest amount on record. In the same period, the wholesale price has surged 76 percent, reaching $1.4308 a pound on Aug. 3, the highest level since at least 1998, government data show.

“There are just no stocks now, no frozen bellies around,” and U.S. supplies can’t meet consumer demand for bacon, said Tom Cawthorne, the director of hog marketing at R.J. O’Brien & Associates in Chicago.

On the Chicago Mercantile Exchange, pork-belly futures for August delivery jumped 4.5 cents, the most allowed, or 3.9 percent. The settlement was the highest price since the CME began trading pork bellies in September 1961.

Futures have soared 46 percent in the past year as bacon demand recovered from the recession and the outbreak of swine flu last year.

Hog futures for October settlement slid 2.925 cents, or 3.7 percent, to close at 76.025 cents a pound at 1 p.m. in Chicago. That marked the biggest drop for a most-active contract since Aug. 7, 2009. Futures for August, the contract closest to expiration, tumbled 3 cents, the exchange limit.

Pork ‘Cutout’

The wholesale-pork cutout, a weighted average of cuts including bellies, ribs and hams, declined 0.05 cent yesterday to 91.48 cents a pound, according to the USDA. The day before, the price reached the highest level since May.

Pork prices may be near a peak as rising costs limit demand from grocers, said Chad Henderson, a market analyst at Prime Agricultural Consultants Inc. in Brookfield, Wisconsin. U.S. meatpackers shipped 9.21 million pounds of pork last week, the least for a nonholiday week since late June.

“I don’t see anyone wanting to push too much more in retail,” Henderson said. “Pork is starting to look expensive.”

Stalled poultry trade with Russia may pressure livestock prices as more meat is left in the U.S. market, Troy Vetterkind, the owner of Vetterkind Cattle Brokerage in Chicago, said in a report.

Russia, once the largest importer of U.S. chicken, halted shipments in January by barring the use of chlorine as a disinfectant. President Barack Obama announced in June that the U.S. and Russia had agreed to resume trade. U.S. Trade Representative Ron Kirk said yesterday that the deal hit a snag.

Cattle Prices Climb

Cattle futures for October delivery climbed 0.5 cent, or 0.5 percent, to 96.275 cents a pound. Earlier, the price reached 97 cents, the highest level since May 10.

Feeder-cattle futures for September settlement dropped 1.25 cents, or 1.1 percent, to $1.12675 a pound. Rising corn costs may deter herd expansion, limiting demand for feeder cattle, Prime Agricultural’s Henderson said.

Corn futures surged to a 13-month high after Russia halted grain exports for the rest of the year following the worst drought in at least five decades.

To contact the reporter on this story: Whitney McFerron in Chicago at wmcferron1@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.

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