July 12, 2011
US hog futures rise sharply
US lean-hog futures soared Monday (Jul 11) on fresh signals that China could sharply increase its purchases of US commodities in order to rein in spiralling costs for pork and other staples of the Chinese diet.
Contracts for hogs in August recently traded at 99.17 US cents a pound after rallying 3.1%, or 3 US cents - the maximum one-day limit for price movements - in trading at the Chicago Mercantile Exchange.
Chinese Premier Wen Jiabao on Monday singled out the nation's pork prices in vowing that the Chinese government will make a priority of keeping a lid on runaway food prices. "Stabilising pork markets is a responsibility that the government must not shirk," he said in a statement posted on the central government's website.
It is not yet clear whether China will actually make big purchases of US pork, or will instead buy corn to drive the productivity of its domestic pork industry. Higher corn prices typically make hogs more expensive as animal producers pass on higher feed costs to meat packers. Higher feed costs can also pressure producers to shrink their herds.
Hogs futures also rallied despite increasing worries that a debt crisis in Greece could soon spread to Italy and other euro-zone economies. Markets fell broadly Monday after news emerged over the weekend that European ministers were struggling to contain the crisis.
Cash hog prices are predicted to range from steady to US$1 a hundred pounds lower to begin the week.
Most pork processors have sufficient supplies of hogs for much of this week, said livestock dealers and market managers. Deliveries of contracted hogs with prices tied to July lean-hog futures could limit buying interest in the spot markets this week ahead of July futures expiration on Friday.
