Commodities Review: Hogs Gains From Denmark Virus Scare
07:00, 2001-03-28
By Daniel Rosenberg
Of DOW JONES NEWSWIRES
CHICAGO (Dow Jones)--Hog futures ended sharply higher Tuesday at the Chicago Mercantile Exchange amid concerns about a possible outbreak of foot-and-mouth disease in Denmark.
Danish authorities said Tuesday that three cows in a Danish herd are showing symptoms of what might be the disease. The animals have been tested, and results will be available late Wednesday.
If foot-and-mouth spreads to Denmark, it could mean new business for U.S. pork producers, who compete vigorously against Danish farmers for the Japanese import market. Last year, Japan imported 33% of its pork from Denmark and 29% from the U.S., according to the U.S. Department of Agriculture. Japan has temporarily banned Danish pork as a protective measure, but the ban could become long-lasting if the disease is found there. The U.S. has also banned pork from the country.
Nearby April hogs rose 1.67 cents to 66.52 cents a pound, the highest settlement in more than a week and a climb of nearly the 2-cent daily exchange trading limit. Traders didn't want to bet against the market, fearing that confirmation of the disease in Denmark could mean an even sharper rise in prices Wednesday.
""We probably would go limit-up,"" said Chuck Levitt, analyst with brokerage Alaron Trading Corp. in Chicago. ""Remember, Denmark doesn't just sell pork to Japan. Russia takes a good quantity, and we take a fairly good quantity. We're talking about $1 billion of pork here. There's a lot at stake.""
But there are reasons to remain just cautiously optimistic about U.S. export hopes, Levitt said.
Even if Denmark does have the disease, there's a chance it could contain it on one farm or in one locale, something the U.K. hasn't been able to do. If the disease were contained, and no other cases found within a two-week period, Denmark could maintain its status as a country free of the virus and resume exports.
Even if a case is found, and Japan's ban on Danish pork persists, there's no guarantee of big U.S. sales right away. Japan has ample pork stocks, and its economy is sputtering. Also, consumers there are very food-safety conscious, and may turn away from pork despite the fact that foot-and-mouth rarely affects humans. In 1997, when Taiwan's herd suffered an epidemic of the disease, Japan actually ended up buying less pork from the U.S., mainly because of a slip in consumer demand for the product, analysts said.
U.S. pork exporters contacted over the last week said they haven't been selling any extra meat to Japan or to other countries, though they have had some inquiries from Eastern Europe, which normally buys pork from the European Union.
""Traders may be putting the cart before the horse,"" if they think exports will rise immediately, Levitt warned.
And news on the domestic front remains mostly bearish. The weekly slaughter is running ahead of last year's pace, and U.S. wholesale pork prices fell early this week in the face of stiff competition from beef, analysts said.
In addition, the USDA's quarterly U.S. hog supply report due Friday is expected to show continued growth in the herd.
""The numbers aren't looking friendly,"" said Leo Burns, trader with Iowa Grain on the CME floor, referring to preliminary estimates. ""It's going to show a lot of hogs."" -By Daniel Rosenberg, Dow Jones Newswires;
312-750-4118; daniel.rosenberg@dowjones.com
In other commodity markets:
COTTON: Futures fell on the New York Cotton Exchange as a failure to breach higher levels spurred selling by trade and speculative participants. The May contract slid 1.44 cents to 47.59 cents a pound. Traders said a major, Memphis-based cotton merchant initiated the selling. CRUDE OIL: Futures gained at the New York Mercantile Exchange, with a late-session rally on expectations of tight supplies meeting with heavy selling. The May contract added 27 cents to $27.75 a barrel, having scored a high of $28.04. Traders were looking ahead to the weekly American Petroleum Institute's inventory report, which was expected to show a rise in crude stocks but further declines in distillate stocks, which include heating oil and diesel fuel.
Copyright c 1999-2000 Dow Jones Inc. All rights reserved.
quamnet.com |
