Speculation that China may soon buy more U.S. pork led to higher hog prices Tuesday and shares of top pork producer Smithfield Foods, Inc rose on the same hope. Smithfield, the nation's largest hog and pork producer, reported it has not made any new deals for pork with China. That did not deter investors who sent Chicago Mercantile Exchange hog futures prices up the daily trading limit and Smithfield's shares up more than 3 percent at the New York Stock Exchange.
In August, Smithfield announced a deal to sell 60 million pounds of pork to China for delivery through December. China is expected to buy more U.S. pork, but when and how much is unknown. "Given their needs in China, they are going to be back in the market over the next several months," said Jim Robb, economist at the Denver-based Livestock Marketing Information Center. "There are still lingering impacts of their swine disease problem."
The disease, Porcine Reproductive and Respiratory Syndrome or blue ear disease, killed over 1 million Chinese hogs earlier this year. Although a vaccination program is bringing the disease under control, the outbreak sent Chinese pork prices higher and prompted talk that Beijing will import pork to help bring meat prices down. On the year through September, China and Hong Kong combined have bought nearly 105,200 metric tons of U.S. pork, up 71 percent from a year earlier, according to government data compiled by the U.S. Meat Export Federation.
That has moved China/Hong Kong past Canada as the third largest export market for U.S. pork so far this year.
Fueling some of Tuesday's rumors regarding a new China deal was news that Smithfield will run its Sioux City, Iowa, pork plant on Sunday. Hog traders had assumed the Sioux City plant's extra production was for new China business, but Smithfield said it was due to an abundance of hogs. Running a pork plant on Sunday is rare. It last happened in October 2006, according to Ron Plain, agriculture economist at the University of Missouri.
The abundant U.S. hog herd this year has created a surge in pork production. USDA estimated Monday's hog slaughter at 430,000 head, which would be a one-day record if confirmed. Analysts predict that pork exports will be critical in the months ahead to take pork supplies off the market and prevent a severe drop in hog prices.