U.S. hog futures tumbled in early trading Monday amid trader caution about near-term demand for pork and a flat-to-lower outlook for the cash market to begin the week.
Concerns about the severe damage in northern Japan caused by the nation's worst earthquake and the tsunami that resulted from it remain at the forefront. Japan is the U.S.' top international customer for pork in terms of sales dollars, accounting for nearly $1.646 billion in 2010, over 34% of U.S. total pork exports, according to data from the U.S. Department of Agriculture and U.S. Meat Export Federation.
April, the front month futures contract for lean hogs futures, recently traded 1.85 cents lower, or 2.1%, at 86.30 cents a pound. It hit a two-month low. June hog futures, the leader in open interest, were off 1.45 cents, or 1.5%, at 98.05 cents and hit a 1 1/2-month low.
Traders are concerned about possible disruptions of shipments to Japan due to the heavy damage in the northern region of the country. Previously placed sell orders were tripped as prices fell through key chart support levels including the most recent cycle lows, brokers said.
The status for meat shipments from the U.S. to Japan is unclear, analysts and brokers said. But for some companies, shipments may be little affected depending upon their port of destination in Japan.
Tyson Foods Inc. (TSN) is "waiting for more information about the impact of this unfortunate event, however, at this point we're not currently aware of any disruption to our exports to Japan," said Gary Mickelson, company spokesman. He also said the company's sales office in Tokyo was not damaged nor were any of the eight staff members there hurt.
In the cash markets, pork processors are expected to bid flat to $1 lower prices on demand caution as well. Any disruptions in shipments currently scheduled to sail to Japan or reduced near-term demand for pork there could put more product back into the domestic market and weigh on prices.
The terminal hog markets were expected to be mostly flat in light volume with highs expected from $56 to $57.50 on a live basis.