Hog futures enjoyed strong gains amid ideas that a correction
in near-term contracts, in line with decreasing concerns over the knock-on
effects of porcine epidemic diahorrea virus, had been overplayed.
Lean hogs for June, the best-traded contract, stood 1.7% higher
at 121.625 cents a pound in late deals in Chicago.
The August contract was up more than 2%, while October
futures touched a contract high of 107.00 cents a pound earlier.
The gains follow a more mixed period for prices, with
near-term futures being undermined by observations that a decline in slaughter
numbers - blamed on the US outbreak of porcine epidemic diahorrea virus (PEDv),
which has high mortality among infected piglets - was being more than offset in
terms of pork production by larger animal weights.
Average weights have been of late running nearly 5% higher
than a year ago, compared with a drop of 2-3% in slaughter numbers.
Supply vs demand
However, pork production may be poised for a slide, with
slaughter rates typically falling during the summer.
And the seasonal decline may be exacerbated this year by the
knock-on effects of PEDv, which is viewed as a more severe threat during winter
With animals taking some 5.5-6 months between birth and bringing
to market, "the impact of the virus should be felt right through the summer,
starting from around the middle of May," Don Roose, president of US broker US Commodities,
Meanwhile, demand is proving strong, as attested to both by
domestic and export data, with US shipments in March soaring 23% to 161,858
tonnes, led by a 43% jump to 40,075 tonnes in volumes heading to Mexico,
official statistics last week showed.
"Demand is strong, supply is down, factors which should support
the market," Mr Roose said.
'Will keep hog prices
Separately, Societe Generale said that it was ditching
expectations of a drop in lean hog futures in the July-to-September quarter, instead
forecasting a rise, seeing higher slaughter weights as likely to offset only "partially"
the dent to animal numbers from PEDv
The number of pigs per litter on US hog farms had fallen to
give years lows in January and February.
Furthermore, the spread of porcine delta coronavirus( PDCov),
a disease similar to PEDv, now found in 142 farms in 14 states adds "another
leg of supply risk to the future supply of pork", SocGen analyst Christopher
"Additional supply shocks caused by any new cases of
disease, as well as the normal biological lag inherent in raising livestock,
will likely keep hog prices elevated for the foreseeable future."
The bank, which will on June 4 unveil fresh crop price
forecasts, said it saw "significant upside risk" to current forecasts for Chicago
hog futures, which it three months ago forecast averaging 86.69 cents a pound
in the July-to-September quarter and 82.99 cents a pound in the last quarter of
2014, on a front contract basis.