Hogs, Pork Bellies Plunge on Swine Flu Concern; Cattle Decline

By Whitney McFerron

April 27 (Bloomberg) — Hog and pork-belly futures fell the most allowed by the Chicago Mercantile Exchange on speculation that pork demand will shrink as swine flu spreads around the world. Cattle also sank.

The U.S. government declared a public health emergency after at least 40 cases of swine flu, normally confined to pigs, were confirmed from New York to California. In Mexico, the virus killed at least 149 people, Health Minister Jose Cordova said today. China, Russia, Indonesia and the Philippines have blocked imports of pork from Mexico and at least parts of the U.S.

“It’s going to be a while for people to understand the issue and what the risks are,” said Christian Mayer, a market adviser at Northstar Commodity Investments LLC in Minneapolis. “If you eat properly handled and cooked pork products, they’re safe. But it’s going to be hyped up, and the initial reaction is going to be panic.”

Hog futures for June settlement dropped 3 cents, or 4.2 percent, to 68.65 cents a pound on the CME. The exchange limits the daily gains or losses on hog contracts to 3 cents. The most-active contract fell 9.8 percent in the past year.

Pork-belly futures for July delivery also fell 3 cents, or 3.6 percent, to 80.8 cents a pound in Chicago. Pork bellies are used to make bacon.

Cases of swine flu were confirmed in Canada, the U.K. and Spain, and more are suspected in New Zealand and elsewhere in Europe, health authorities said. In New York City, as many as 28 cases have been reported, and at least 100 additional people may have been infected, New York Mayor Michael Bloomberg told reporters today. Bloomberg is the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News.

Respiratory Disease

Swine flu is a respiratory disease caused by a type-A influenza virus that regularly leads to outbreaks among pigs, according to the U.S. Centers for Disease Control and Prevention. Three main flu strains found in people — H3N2, H1N1 and type B — cause as many as 500,000 deaths a year, according to the World Health Organization.

Pandemics occur when a novel A-type flu virus, to which almost no one has natural immunity, emerges and begins spreading. There is no vaccine to prevent swine flu.

There’s no evidence the disease is spread by exposure to “pork or pigs,” said Keiji Fukuda, the WHO’s assistant director-general for health security and environment. Eating pork that has been correctly processed, stored and cooked is safe, according to the CDC.

Export Bans

China barred direct and indirect imports of swine or pork products from Mexico and U.S. sources in Texas, California and Kansas, according to a statement from the country’s General Administration of Quality Supervision, Inspection and Quarantine. China, including Hong Kong, was the second-largest importer of U.S. pork last year after Japan, according to U.S. Department of Agriculture data.

Russia, the fourth-largest consumer of U.S. pork last year, has suspended imports of the meat from Mexico and 11 U.S. states, as well as nine South American countries.

It may be some time before U.S. pork exports rebound, said Don Roose, the president of U.S. Commodities Inc. in West Des Moines, Iowa. He said beef exports have not yet recovered from the discovery in late 2003 of the first U.S. case of mad cow disease, or bovine spongiform encephalopathy.

U.S. beef exports plunged 82 percent to 460.3 million pounds in 2004, from 2.518 billion pounds in 2003, according to USDA data. Shipments in 2008 reached 1.888 billion pounds.

“We’re back to looking at what happened to our export demand with BSE and beef, and we don’t know how some of these countries will react,” Roose said. “Russia has certainly given us an early tip to how they’re reacting, and there may be others to follow.”

Cattle Futures

Cattle futures for June delivery fell 0.8 cent, or 1 percent, to 81.8 cents a pound in Chicago. The most-active contract is down 12 percent in the past year. Feeder-cattle futures for August settlement declined 0.6 cent, or 0.6 percent, to 99.75 cents a pound.

Wholesale choice beef prices still rose 0.1 percent today to $1.5214 a pound, according to the USDA. Wholesale pork sold for 59.75 cents a pound today, USDA data show.

The Mexican swine-flu outbreak may boost demand for beef, Roose said. “It may be that people will move to a safer protein, even though it’s more expensive,” he said.

To contact the reporter on this story: Whitney McFerron in Chicago at wmcferron1@bloomberg.net.


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