August 6, 2009

US hog prices fell Wednesday (Aug 5) to their lowest levels in nearly two years as investors are worried of the resurgence of AH1N1 flu and will have consumers avoiding pork again this fall, even though the flu is not spread by hogs or pork.

US Homeland Security Secretary Janet Napolitano said that the flu will flare up after schools open in the fall and there will not be enough vaccine early in the flu season.

Talk that producers have been slow to reduce their herds despite nearly two years of losses also prompted selling at the Chicago Mercantile Exchange (CME) hog markets.

At the CME, the August hog futures were down 1.250 cents at 52.725 cents per pound and October off 1.125 cents at 49.0. Some 2010 contracts briefly dropped the 3-cent daily limit.

Archer Financial livestock broker Dennis Smith is expecting that demand is not going to improve in the next couple of months due to the flu situation.

Cases of AH1N1 flu have continued to increase around the world, but the flu has largely been out of the headlines since last winter. However, it could reemerge as a major news event if cases and deaths increase this fall.

In its latest update last week the World Health Organization (WHO) reported 162,230 confirmed cases and 1,154 deaths.

US hog producers have been losing money since October 2007, which has had analysts and economists predicting these producers would reduce production in order to drive up hog prices. But that has not happened.

Smithfield Foods Inc., the largest US hog producer, and Tyson Foods Inc., a major hog producer, have taken the lead in liquidating some of their hog breeding herd.

Other hog producers have not followed Smithfield and Tyson, hoping the market will rebound shortly and they'll be poised to capitalise on a renewed appetite for pork.