Hog futures ended the week on a mixed note, as sagging ham prices trumped news of China lifting H1N1 restrictions on U.S. pork.
Wholesale ham prices have tumbled about 9.6 cents a pound, or 13 percent, the past two weeks, including a 4-cent drop yesterday, according to government figures. The decline reflects a slowdown in demand after meat buyers wrapped up purchases for the April 4 Easter holiday.
The decline in hams contributed to a weaker tone in the pork cutout and cash hog markets, slowing upward momentum in Chicago’s futures pits after summer contracts rallied to contract highs.
“Cutouts continue to slide and cash prices continue to slide,” said Dennis Smith, a broker with Archer Financial Services in Chicago. “It appears demand is off a bit for pork, for whatever reason, probably because Easter demand is done.”
Skinned hams averaged 64.62 cents a pound yesterday, down from 74.19 cents two weeks earlier, according to USDA data. In CME Group trading, April lean hog futures rose 0.475 cent to 73.35 cents a pound, after falling earlier in the session to 72.25 cents. April futures still rose 1 percent this week. June hogs fell 0.35 cent to 82.57 cents, after reaching a contract high of 83.225 cents.
Traders largely dismissed the announcement late yesterday that China had agreed to lift restrictions on U.S. pork imports. China banned most U.S. pork imports in April following the H1N1 influenza outbreak.
Industry officials said the re-opening of the Chinese market will provide a boost for U.S. pork producers who lost money last year in part because weaker export demand pressured hog prices.
In 2009, U.S. pork exports to China and Taiwan plunged 38 percent to $427 million from $690 million in 2008, according to the National Pork Producers Council.
But Smith said it is unlikely China becomes a significant pork buyer over the next three to six months. “China wants to be pretty self-reliant and raise its own pork,” Smith said. “They have no interest in buying pork from us right now.”
In the CME pits, traders had a wait-and-see mindset toward any potential new business from China or Russia, which also recently lifted import restrictions on U.S. pork.
Rumors of Russia making new U.S. pork purchases spurred late buying in April futures, independent hog trader Jim Burns said.
Next week, the direction of cash hogs and pork prices will set the tone for futures, Burns said. Longer-term, hog futures probably will maintain a bullish bias amid declining pig inventories and prospects for improved exports, he said.
“Part of me wants to see if the cash market stabilizes and hams stabilize,” Burns said. “But I imagine we can get this thing back up and test the highs.”
April hogs on Jan. 19 reached 74.25 cents a pound, the contract’s highest price since December 2008. The contract is up 5 percent this year.
On Midwest cash markets this morning, hogs averaged $66.09 to $67.23 per hundred pounds, down $1.15 to $1.38 from yesterday, according to the USDA.