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CME: Pork Demand Amid Swine Flu Scare

by 5m Editor
28 April 2009, at 10:09am

US - CME's Daily Livestock Report for 27 April 2009.

CME Group Lean Hogs Futures traders voted a resounding “SCARED” today over the spreading swine flu outbreak — which some are already referring to as a pandemic. The key issue, of course, is demand for pork when “swine flu” is making people sick in several countries and has now killed nearly 150 people in Mexico. US pork and meat groups fought today to clear pigs’ honorable name and appear to be making some headway.

The World Health Organization issued a press release late in the day pointing out that the virus should not be called “swine flu” since it contains genetic material from swine, asian and avian (bird) flu strains. WHO recommended that it be called “North American influenza.” We’re not sure why it isn’t “Mexico influenza” since virtually every case points to that country as the source of the virus. There has still been no documented case of the virus in pigs and it is still not known whether the virus will even infect pigs. WHO, the US Centers for Disease Control (CDC) and most media reports point out that the virus is not spread through pork but that mention usually comes very late in the story.

The demand issues are three-fold. First, there is demand in the US domestic market — where 80 per cent of all US production was sold last year and, very likely, a higher percentage will need to move this year. Continued repetition of the “it doesn’t come from pigs or pork” message and the name change, if it is actually picked up, will help but some of our contacts fear that the damage may already be done. The second issue will be pork demand in Mexico — our second largest export market thus far in 2009. Closed businesses and schools and restrictions on movement will slow Mexico’s economy and the pig and flu connection may be more difficult to break there, especially with press reports that the flu may have started in a small boy who lived near a pig farm in Veracruz state.

Finally, there are other export markets. Russia banned all meat imports from Kansas, Texas and California today and banned pork imports from those states plus Alabama, Georgia, Kansas, New Mexico, Louisiana and Oklahoma. As we pointed out yesterday, Russia has a long history of blocking meat imports for about any reason, so this is no surprise. There are reports that China will officially ban pork imports from some states as well and other Southeast Asia countries have announced bans — pretty understandable given their past experience with bird flu.

There was some good news for livestock producers today — the pace of US corn planting grew sharply last week. USDA reported that 22 per cent of acres are now planted. That compares to only 10 per cent last year but an average of 34 per cent over the past 5 years. The big catch-up state was an important one — Iowa, where 47 per cent of the corn acres are now planted.

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