By Kelsey Gee
CHICAGO--Hog prices surged 2.8% to an all-time high, fueled by
concerns that a deadly swine virus is cutting deeper into U.S.
supplies.
Lean-hog futures jumped three cents a pound--the
exchange-imposed daily limit--as traders worry the virus is
spreading and will take a heavier toll on U.S. production than
previously thought.
April hog futures at the Chicago Mercantile Exchange on Tuesday
reached $1.1167 a pound, setting a record for the second straight
day. Prices have soared 31% so far this year.
Porcine epidemic diarrhea virus has spread to farms in 25 states
and killed millions of young pigs since it was identified in the
U.S. for the first time last April, and the number of confirmed
cases has accelerated in recent months. The virus, which causes
severe diarrhea and vomiting, is fatal only to young pigs and poses
no threat to human health or food safety, according to
veterinarians.
The virus has contributed to higher U.S. pork prices for
consumers. Federal forecasters project retail prices to rise as
much as 3% this year.
Futures traders have taken cues lately from the cash markets for
hogs, where meatpackers have been paying more for slaughter-ready
animals. The average cash price jumped to 97.28 cents a pound this
week, about 18% higher than a month earlier, according to CME
data.
Before this week, the record high for a front-month hog futures
contract at the CME was $1.0745 a pound in August 2011.
"This market has been explosive," said Don Roose, president of
risk-management firm U.S. Commodities Inc. in West Des Moines,
Iowa.
Many traders now believe the virus will cause U.S. pork
production to decline in the second and third quarters, Mr. Roose
said. In its most recent estimate, the U.S. Department of
Agriculture forecast a 1% increase from a year earlier in both
periods.
Last month, the USDA cut its forecast for total U.S. pork
production this year by 160 million pounds to 23.4 billion, citing
the continued spread of the virus. Its forecast marked a 1%
increase over 2013 output, down from a nearly 2% increase projected
in January.
The soaring futures prices represent "fearful buying," said Ron
Plain, an agricultural economist at the University of Missouri who
has followed the livestock markets for 33 years. "I've never seen
anything quite like this."
As of Feb. 16, 3,856 separate positive cases of the virus have
been reported to the National Animal Health Laboratory Network,
which tracks the disease. That is nearly double the figure of 1,998
at the end of 2013. Each case may represent anywhere from one
infected animal on a farm to thousands across a producer's
operations.
The USDA estimates U.S. retail pork prices will rise 2% to 3%
this year, up from 0.9% last year. Average retail prices have been
edging lower in recent months, after hitting a record $3.81 a pound
in October, according to USDA data.
Write to Kelsey Gee at kelsey.gee@wsj.com
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