Hog Futures Settle at High Amid Tighter Supplies

By Dow Jones Business News, 
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By Kelsey Gee

CHICAGO--U.S. hog futures jumped to a record Monday, signaling that grocery shoppers could face further increases in pork prices in the months ahead.

Hog futures for July, the front-month contract, gained 0.47 cent, or 0.4%, to $1.283 a pound at the Chicago Mercantile Exchange, surpassing the previous record settlement reached on Thursday.

Hog futures have soared 50% this year--among the fastest-rising commodities--as a deadly swine disease has cut into supplies of slaughter-ready animals. The gains have extended to bacon, ham and pork-chop prices at the supermarket, with average U.S. retail pork prices reaching a record $4.10 pound last month, up 15% from a year earlier, according to the U.S. Agriculture Department.

The disease, known as porcine epidemic diarrhea virus, or PED virus, has killed millions of piglets since it was identified in the U.S. in April 2013. The virus, fatal only to young pigs, spread rapidly through the fall and winter. Hogs typically take around six months to grow to slaughter weight.

For the week ended Friday, U.S. wholesale pork prices jumped 5%, stoking more aggressive bids for hogs in the physical markets as retailers and restaurants stocked up on pork bellies, loins and other products ahead of the Fourth of July holiday, an important sales period for red meat.

"We've seen some impressive gains in both pork-product prices and in the cash markets," said Adam Stout, an analyst with brokerage INTL FCStone in Kansas City, Mo.

While the front-month hogs contract settled at a record Monday, the most-active August contract slipped 0.175 cent, or 0.1%, to $1.28975 a pound at the CME.

Analysts and traders are still waiting to see if the PED virus leads to a sharp decline in U.S. pork supplies this summer. Hog farmers have been selling bigger animals, which has mitigated the impact of tighter supplies.

"The question I have is, when do we actually see the supply reductions so many had feared?" Mr. Stout said. "Even though we've seen lower numbers of hogs slaughtered, producers have done a tremendous job offsetting the tighter supplies with heavier weights."

Last week, the USDA reported that the average weight of hogs in Iowa and southern Minnesota was 287 pounds for the week ended June 14, up 4.4% from a year earlier. Iowa is the nation's largest hog producer.

Market participants are bracing for a quarterly USDA hogs and pig report Friday to shed further light on the supply outlook for the remainder of the year.

Cattle futures extended a recent climb, supported, too, by smaller-than-expected supplies. June live-cattle futures advanced 0.6 cent, or 0.4%, to $1.4815 a pound. August feeder cattle gained 1.02 cent, or 0.5%, to $2.0790 a pound.

Write to Kelsey Gee at kelsey.gee@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires


  (END) Dow Jones Newswires
  06-23-141617ET
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