As flu season approaches, investors are betting consumers will back away from pork purchases, according to a Reuters report. U.S. hog prices declined to their lowest levels in nearly two years on Wednesday.

Even though the Type A H1N1 flu is not spread by hogs or pork, investors worry that consumers may avoid pork purchases if flu cases increase this fall as health officials fear.

"In the hog industry, there is a fair amount of concern that it (flu) will be back in the news a lot,” says Ron Plain, University of Missouri agricultural economist.

Dennis Smith, livestock broker at Archer Financial, expects a glut of pork and weaker demand going forward. In addition, slow reduction in the swine herd prompted selling at the Chicago Mercantile Exchange hog markets.

James Burns, a hog trader at the Chicago Mercantile Exchange, cites the industry’s reluctance to slow production. "Eventually all these producers out there are going to be forced into liquidation," said Burns. "There's too many hogs out there and they have not liquidated enough."

Both Smithfield Foods and Tyson Foods have announced reductions in sow numbers. Other producers have been reluctant to reduce sow numbers in hopes of a market rebound. Sow slaughter is actually down from a year ago, according to Plain.

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Source: Reuters