There's not much that's new or different in USDA's June Hogs and Pigs Report, released last Friday (June 24.) Across the board, most numbers were nearly equal to 2004 levels as well as in line with pre-report estimates.

While the hog markets will likely react in a neutral fashion to USDA's June Hogs and Pigs Report, the confirmation of a second positive BSE case (See BSE test results in confirmed positive) for the U.S. beef industry could lend support to the hog-futures market.

"The BSE case will raise the spector of doubt with some customers," says Dan Vaught, livestock analyst with AG Edwards and Co., "mostly in the export market."

Chuck Levitt, Alaron Trading, concurs, pointing out that U.S. beef buyers like Japan and Korea have been dragging their feet, and this new case will likely extend their apprehension, "perhaps through the end of this year."

"It (the second BSE case) could be a real boost for pork demand," Vaught notes. "But, we do have other factors in play here. We are very close to record production on the poultry side, and beef is still producting quite a bit." It's also worth noting that last year's hot pork demand benefited from high-protein diets, a phenomenon that has waned greatly since then.

"Pork was a significant beneficiary of beef's previous BSE episode. Maybe the reaction will be less less significant this time, but but pork could get increased bookings in the export market now, " says Levitt.  

Indeed, last year's pork industry saw a 52 percent rally in hog prices, during a time when pork supplies increased 3 percent. That was an unprecidented reaction, as Glenn Grimes, University of Missouri, likes to caution.

So far this year, pork's cold storage supplies had been growing at a steady pace through the spring.

The futures market appears to have been building in a diminishing demand for pork, notes Vaught. The question now is will that occur, or will pork demand turn higher.  Without question, demand still holds the cards to profitability– in the long term and the short term.