August 17, 2007

US hog futures down as China delists hog plants

China's delisting of eight US pork processing plants has caused a sharp drop in the lean hog futures market. 

China ban pork from the plants due to discovery of ractopamine in shipments, a drug used to enhance lean meat yield in several meat-producing countries.  Its use is legal in the US and several other countries but not in China.

Analysts say the ban makes doing significant business with China more difficult and could mean that other competitors could fill the vacuum left by the US. Market speculation also said the launching in the US of a second series of recalls for toys made in China may have prompted Chinese authorities to retaliate by banning US pork.

Pork supply fundamentals continue to look negative and likely will keep the pressure on both the cash and futures. Before the ban, US pork exports for this year were already expected to be lower than a year ago by the USDA.