March 3 (Bloomberg) -- Hog futures rose to a record for the second straight session amid a spreading virus that kills piglets, leaving Americans poised to pay more for pork.
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 cases surged in 2014, reaching 3,253 as of Feb. 16, National Animal Health Laboratory Network data show.
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 forecast for pork production by 0.7 percent and increased its outlook for hog costs. This year, futures have surged 27 percent, the second-biggest gain among 24 raw materials in the Standard & Poor’s GSCI Spot Index.
“There is going to be a shortage of pigs,” Mark Schultz, the chief market analyst at Northstar Commodity Investments LLC in Minneapolis, said in a telephone interview. The 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 1.7 percent to close at $1.08675 a pound at 1 p.m. on the Chicago Mercantile Exchange. The price reached a record $1.0985, climbing by the exchange limit of 3 cents for the third straight session.
Trading more than doubled compared with the 100-day average for this time, according to data compiled by Bloomberg.
Last month, wholesale pork surged 18 percent, the most since April 2010, and the price has jumped 28 percent in the past 12 months, 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.
As of Feb. 28, meatpackers processed an estimated 18.416 million hogs in 2014, 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, government data showed on Feb. 28. Bullish bets have surged 60 percent this year.
“The PED virus has impacted our internal farm operations and several of our independent hog suppliers,” Jeffrey Ettinger, the 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.”
Cattle futures for April delivery dropped 0.6 percent to $1.44125 a pound. The price climbed to a record $1.45975 on Feb. 27.
Feeder-cattle futures for May settlement rose less than 0.1 percent $1.73725 a pound. The price rose to an all-time high $1.7525 on Feb. 27.
Coffee on ICE Futures U.S. in New York has surged 75 percent this year, leading gains in GSCI prices. Cattle prices have climbed 7.1 percent, and feeder cattle have advanced 3.8 percent.
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