June 18, 2009

US hog futures fell on Tuesday (June 16) as concerns over large pork supplies and slack global demand overwhelmed support from a weaker dollar.

Hog futures rose early as a decline in the dollar brightened export prospects, but futures fell back when the dollar pared losses and the stock market turned lower.

July lean hogs closed off 0.125 cent at 58.275 cents per pound and August was off 0.300 cent at 58.100 cents. August, December and February 2010 posted contract lows.

Smithfield Foods on Tuesday (June 16) reported a smaller-than-expected quarterly loss on better-than-expected margins in its hog and pork businesses, but traders still felt the pork industry would suffer for the foreseeable future.

High feed costs did weigh on Smithfield's quarterly financial results and the company said pork sales were down due to the recession.

Traders said the Smithfield news showed that the industry is still in trouble, especially with ongoing problems due to the AH1N1 flu.

Traders expected losses to continue for both producers and packers as the industry struggles to deal with the abundant supply of pork and reduced export interest.

Russia lifted a ban on meat imports from Washington state and softened a ban on Texas that were imposed after the outbreak of the AH1N1 flu. The country, however, banned live pigs and raw pork imports from New Jersey.

Smithfield said that to cope with recent losses, it had reduced its sow herd, among other moves and this reduction of the herd is seen spreading, adding to pork supplies.