August 6, 2010

 

US pork belly futures surge amid lower supplies

 

 

Pork-belly futures surged to a record US$1.185 a pound after a plunge in US inventories of the meat, which is used to make bacon.

 

Meanwhile, hogs dropped the most in a year, and cattle gained.

 

In the past year, pork-belly inventories monitored by the CME have tumbled 73% after losses in 2008 and 2009 spurred farmers to cut breeding herds close to the lowest amount on record. In the same period, the wholesale price has surged 76%, reaching US$1.4308 a pound on August 3, the highest level since at least 1998, government data show.

 

On the CME, pork-belly futures for August delivery jumped 4.5 cents, the most allowed, or 3.9%. The settlement was the highest price since the CME began trading pork bellies in September 1961.

 

Futures have soared 46% in the past year as bacon demand recovered from the recession and the outbreak of swine flu last year.

 

Hog futures for October settlement slid 2.925 cents, or 3.7%, to close at 76.025 cents a pound in Chicago. That marked the biggest drop for a most-active contract since August 7, 2009. Futures for August, the contract closest to expiration, tumbled 3 cents, the exchange limit.

 

The wholesale-pork cutout, a weighted average of cuts including bellies, ribs and hams, declined 0.05 cent yesterday to 91.48 cents a pound, according to the USDA. The day before, the price reached the highest level since May.

 

Pork prices may be near a peak as rising costs limit demand from grocers, analysts said. US meatpackers shipped 9.21 million pounds of pork last week, the least for a nonholiday week since late June.

 

Stalled poultry trade with Russia may pressure livestock prices as more meat is left in the US market, Troy Vetterkind, the owner of Vetterkind Cattle Brokerage in Chicago, said in a report.

 

Russia, once the largest importer of US chicken, halted shipments in January by barring the use of chlorine as a disinfectant. President Barack Obama announced in June that the US and Russia had agreed to resume trade. US Trade Representative Ron Kirk said yesterday that the deal hit a snag.

 

Meanwhile, cattle futures for October delivery climbed 0.5 cent, or 0.5%, to 96.275 cents a pound. Earlier, the price reached 97 cents, the highest level since May 10.

 

Feeder-cattle futures for September settlement dropped 1.25 cents, or 1.1%, to US$1.12675 a pound. Rising corn costs may deter herd expansion, limiting demand for feeder cattle, Prime Agricultural's Henderson said.

 

Corn futures surged to a 13-month high after Russia halted grain exports for the rest of the year following the worst drought in at least five decades.