By Whitney McFerron
Oct. 29 (Bloomberg) -- Hog futures rose to a three-month high after China said it would “quickly resume” imports of U.S. pork, lifting a ban imposed after the swine flu outbreak in April. Cattle fell.
The U.S. is “encouraged” by China’s plan and expects an announcement soon on lifting the ban, U.S. Agriculture Secretary Tom Vilsack said in Hangzhou after meeting with Chinese Agriculture Minister Sun Zhengcai. China, the second- largest market for U.S. pork last year, had blocked shipments from 49 states. Taiwan announced last week that it would relax restrictions on U.S. beef exports.
“Those are two positive export-news stories back-to- back,” said Lawrence Kane, a market adviser at Stewart- Peterson Group in Elmwood, Illinois. “We could look back six months from now and see that this is a good turning point for the meat industry.”
Hog futures for December settlement rose 1.25 cents, or 2.2 percent, to 57.2 cents a pound on the Chicago Mercantile Exchange. Earlier, the price touched 57.65 cents, the highest since July 22.
Hog futures have slid 20 percent since April 23, following the H1N1 outbreak. The World Health Organization has said the virus is not transmitted through properly handled pork. U.S. pork exports to China and Hong Kong plunged 70 percent in the eight months ended Aug. 31 from a year earlier, USDA data show.
Pork Exports
U.S. exports were a record in 2008 as shipments to China and Hong Kong surged 76 percent from a year earlier. Chinese demand increased leading up to the August 2008 Olympics, and an outbreak of porcine reproductive and respiratory syndrome, also known as blue-ear disease, reduced domestic herds in 2007. China is the world’s largest producer and consumer of pork.
“China may resume imports, but I doubt highly we’ll see imports that we saw in 2008, when their hog industry was trying to recover from problems,” said Doug Houghton, an analyst at Richard A. Brock & Associates in Milwaukee. “The potential is still huge further down the road if they don’t keep up with their needs and they have solid economic growth.”
Wholesale pork jumped 2.4 percent yesterday to 57.54 cents a pound, the highest price since Sept. 21, according to the USDA. Renewed Chinese demand is “a positive for pork prices” and may benefit producers including Smithfield Foods Inc., the world’s largest hog processor, said Kenneth Goldman, an analyst at JPMorgan Chase & Co. in New York.
‘Beneficial’ Prices
“Higher pork prices lead to higher hog prices, and higher hog prices are beneficial for Smithfield,” Goldman said today in a note.
Smithfield jumped 85 cents, or 6.4 percent, to $14.07 at 3:38 p.m. in New York Stock Exchange composite trading. Before today, the shares dropped 6 percent this year.
On the CME, cattle futures for December delivery fell 0.65 cent, or 0.7 percent, to 86.275 cents a pound. The price is down 5.2 percent in the past year. Feeder-cattle futures for January settlement declined 0.9 percent to 95.025 cents a pound.
Cattle fell on speculation that the supply of fattened animals will increase, Houghton of Richard A. Brock said. U.S. feedlots boosted purchases of young cattle for three straight months beginning in July. Cattle placed on feed in July may be ready for slaughter next month.
Taiwan, the sixth-largest importer of U.S. beef by value, said Oct. 23 that it will allow purchases of bone-in beef cuts, such as T-bone and rib steak, from cattle younger than 30 months of age. Taiwan restricted U.S. beef exports after the discovery of mad cow disease in the U.S. herd in 2003.