September 20, 2010

 

Russian pork ban hits meat prices

Russia has reimposed a ban on pork imports from two US plants due to health concerns, sparking a fall in meat-futures prices that had been pushed higher by buoyant export markets.

 

Yevgeniy Khorishko, press secretary at the Russian embassy in Washington DC, said imports from two US plants owned by Smithfield Foods Inc. had been barred temporarily since September 8, alongside shipments from facilities in Germany, Spain, Holland, France and some other countries.

 

Mr Khorishko said government officials had found "excessive presence of antibiotics" in pork produced at the plants. The latest move followed a year in which export licenses have been repeatedly revoked and reintroduced by the Russian government.

 

The affected Smithfield plants include its Tar Heel, North Carolina facility – the world's largest pork-packing plant by volume – and one in Clinton, North Carolina. The company didn't immediately respond to a request for comment.

 

The news out of Russia initially drove down hog futures by more than 2%. Hogs for October delivery settled US$0.105, or 1.3%, lower at US$0.782 a pound on the Chicago Mercantile Exchange.

 

According to the US Meat Export Federation, Russia ranks as the sixth-largest export market for US pork this year, though trade and license issues have almost halved the volume of shipments in the seven months ended July.

 

Although pork and beef are competing meat proteins, whenever there is a sharp break or rally in one of the livestock pits, it tends to produce a like response in the other.

 

Tom Cawthorne, a hog trader at R.J. O'Brien, said market participants sold the market primarily because of what was at the time "a rumor" that Russia stopped taking pork from at least two US processors. He said the drop in futures' prices was an overreaction because Russia is only barring pork from two packing plants, not from the entire US market.

 

Bob Martin, president of Empire Programs, downplayed the Russian situation, and said some CME hog traders were looking for a reason to unload some of their long futures positions after the market posted substantial gains over the past two sessions fuelled by generally higher cash hog prices.

 

Hog prices in the western cornbelt on a weighted-average basis were quoted by USDA late Wednesday at US$80.93 a hundredweight, up US$1.09. They were US$1.02 higher at US$79.94 Tuesday. Also, hogs in the Iowa/southern Minnesota region gained US$1.48 Wednesday to US$81.49, and were up US$1.09 Tuesday at US$80.13.

 

"The market went up too far, too fast and people were looking to sell it," said Martin.