March 6, 2014
US pork prices expected to rise 2-3% in 2014
Fuelled by concerns that a deadly swine virus is cutting deeper into US supplies, hog prices in the country surged 2.8% to an all-time high.
Lean-hog futures jumped US$0.03 a pound--the exchange-imposed daily limit--as traders worry the virus is spreading and will take a heavier toll on US production than previously thought.
April hog futures at the Chicago Mercantile Exchange (CME) was +1.07% and reached US$1.1167 a pound, setting a record for the second straight day. Prices have soared 31% so far this year.
Porcine epidemic diarrhoea (PED) virus has spread to farms in 25 states and killed millions of young pigs since it was identified in the US for the first time last April, and the number of confirmed cases has increased in recent months. The virus, which causes severe diarrhoea and vomiting, is fatal only to young pigs and poses no threat to human health or food safety, according to veterinarians.
The rise in US pork prices was attributed to the PED virus. Federal forecasters project retail prices to rise as much as 3% this year.
Futures traders have taken cues lately from the cash markets for hogs, where meatpackers have been paying more for slaughter-ready animals. The average cash price jumped to US$0.9728 a pound this week, about 18% higher than a month earlier, according to CME data.
Before this week, the record high for a front-month hog futures contract at the CME was US$1.0745 a pound in August 2011.
Many traders believe the virus will cause US pork production to decline in the second and third quarters, Don Roose, president of risk-management firm US Commodities Inc. in West Des Moines, Iowa, said. In its most recent estimate, the USDA forecast a 1% increase from a year earlier in both periods.
Last month, the USDA cut its forecast for total US pork production this year by 160 million pounds to 23.4 billion, citing the continued spread of the virus. Its forecast marked a 1% increase over 2013 output, down from a nearly 2% increase projected in January.
As of February 16, 3,856 separate positive cases of the virus have been reported to the National Animal Health Laboratory Network, which tracks the disease. That is nearly double the figure of 1,998 at the end of 2013. Each case may represent anywhere from one infected animal on a farm to thousands across a producer''s operations.
The USDA estimates US retail pork prices will rise 2% to 3% this year, up from 0.9% last year. Average retail prices have been edging lower in recent months, after hitting a record $3.81 a pound in October, according to USDA data.