Fears that the upcoming flu season could slow U.S. pork exports and create significant imbalances in the domestic pork market have contributed to declining hog futures over the past four weeks, write Steve Meyer and Len Steiner in the CME Daily Livestock Report.
Since July 16, the CME August hog futures contract has lost some $17, or 35 percent. U.S. pork exports have helped bring banner profits in 2004, 2005 and 2006 and some of those profits were plowed back into expanding production. By 2008, U.S. pork exports hit 4.7 billion pounds, accounting for 20 percent of overall U.S. pork production - a truly remarkable achievement.
There are significant concerns that a global outbreak of the H1N1 flu will slow demand for pork, both domestically and in export markets. Countries could use the opportunity to further reduce access to their markets in an effort to support domestic producers. As we have seen in other instances, including in this country, there is always the temptation to use such situations to further local economic goals.
There are significant concerns that a global outbreak of the H1N1 flu will bring back the erroneous linkages to pork. There is talk of more sows going to slaughter but markets tell a different story as sow prices in the past four weeks have increased by almost 30 percent at a time when pork supplies are abundant.
Source: CME Daily Livestock Report, The PigSite.com