April 28, 2009
Swine flu sinking hog, corn, soy prices
The swine flu is sending a chill through the farm sector, sinking prices of hogs, corn and soy as well as stinging prices of meat-processing giants such as Smithfield Foods Inc. and Tyson Foods Inc.
While federal authorities have rushed to reassure consumers that it safe to eat pork, stock analysts and commodity traders are worried that shoppers might lose their appetite for pork until the situation becomes clearer.
At the same time, some major foreign customers of the hog farmers, such as China and Russia, have banned the import of pork from some US states. While the biggest US hog producing states have so far escaped being put on the banned lists, some traders are worried that situation might change if human cases of the swine flu are discovered in a major hog-producing state such as Iowa, Illinois or Minnesota.
In early trading at the Chicago Mercantile Exchange, prices of hog futures contracts for delivery in May, June and July were down the daily permissible limit of three cents per pound. The sell-off spilled into the corn and soy pits because hogs eat a lot of these crops.
In early trading at the Chicago Board of Trade, the corn futures contract for May delivery was trading at US$3.645 a bushel, down 12.75 cents a bushel. The soy contract for May delivery was down 45 cents a bushel to US$9.715 a bushel. Grain prices have since recovered much of their early losses in volatile trading.
Smithfield Foods Inc., the nation's largest hog farmer and pork marketer, was down 96 cents a share, or 9 percent, in early trading, to US$9.36 a share. Tyson Foods Inc., which processes cattle, hogs and pigs, was trading at US$10.19 a share, down 74 cents a share, or 7 percent. Shares appear to be climbing back from the initial lows.
Robert Moskow, an analyst at Credit Suisse Group (CS), issued a report early Monday warning that the "part that looks scariest for the US pork industry is that Mexico accounts for 14 percent of US exports and was off to a great start in 2009."
Moskow said he doubts that Mexican imports of US pork can remain strong at a time when Mexican consumers are staying away from restaurants and public places.
