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Hogs Rally Most in 4 Months on Pork Demand Outlook; Cattle Fall

March 7 (Bloomberg) -- Hog futures surged the most since November as slumping U.S. pork prices fueled speculation that demand for the meat will increase as consumers shift from more-expensive beef or poultry cuts. Cattle declined.

The value of a 200-pound (91-kilogram) hog carcass fell to 79.41 cents a pound yesterday, a discount of $1.17 to the same amount of beef, according to the U.S Department of Agriculture. Meatpackers slaughtered 1.283 million hogs in the first three days of this week, up 1.6 percent from a year earlier, USDA data show. Smithfield Foods Inc. said today that pork prices will rise in 2013 on reduced beef supplies.

“Pork has gotten cheap relative to beef, and supermarkets will take advantage of that discount,” David Kruse, a commodity trading adviser at Commstock Investments Inc. in Royal, Iowa, said in a telephone interview. “We are reaching the seasonal peak in hog slaughter and should see supplies begin to taper off 1 or 2 percent into the summer, further boosting demand for hogs.”

Hog futures for April settlement rose 3.2 percent to close at 81.8 cents a pound at 1 p.m. on the Chicago Mercantile Exchange, the biggest gain since Nov 7. Yesterday, the most-active futures touched 78.25 cents, the lowest since Nov. 7. The price has declined 4.6 percent this year.

Deutsche Bank AG advised clients today in a report to close short hog positions because pork has become a better value relative to chicken, which should attract more demand from consumers and retailers. The bank also said a USDA report on March 28 may show fewer hogs were bred in the quarter that ended March 1.

Cattle futures for April delivery slid 0.4 percent to $1.283 a pound on the CME, capping a third straight decline.

Feeder-cattle futures for May settlement rose 0.2 percent to $1.44925 a pound, the biggest gain in a week.

To contact the reporter on this story: Jeff Wilson Chicago at Jwilson29@bloomberg.net

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

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