Hogs Fall as Demand for U.S. Pork May Be Waning; Cattle Gain

By Whitney McFerron

Oct. 28 (Bloomberg) -- Hog futures fell the most in more than a week on speculation that demand for U.S. pork is shrinking as the global credit crisis limits the buying power of meat importers. Cattle prices rose.

The Baltic Dry Index, a measure of commodity shipping costs, dropped 89 percent this year to the lowest since 2002, as some traders were unable to find loans to buy cargoes. Pork stored in U.S. warehouses last month increased 4.6 percent from a year earlier, partly because of waning global demand, said Dave Bauer, president of Brite Futures Inc.

``If we live by exports, then we're going to die by exports,'' Bauer said in a telephone interview from Milwaukee. ``If pork is starting to sit because the rest of the world can't get credit enough to buy it, then we're going to have more issues.''

Hog futures for December settlement fell 0.5 cent, or 0.9 percent, to 58.05 cents a pound on the Chicago Mercantile Exchange, the biggest drop for a most-active contract since Oct. 16. Hogs have declined 9.6 percent this month.

Jamey Franzen, general manager of Iowa Cold Storage in Altoona, Iowa, said pork shipments to Russia from his warehouse have come to a halt in the past month because of the credit crisis. About 4.5 million pounds of bone-in hams destined for Russia this month are sitting in the 200,000-square-foot warehouse because the buyer can't get financing, he said.

`Serious Credit Issues'

``Things this big usually don't get held up like this, unless there are some serious credit issues, and that's what's going on,'' Franzen said.

Over the summer, the warehouse usually sent 520,000 to 780,000 pounds of pork a week to Russia, Franzen said. The warehouse hasn't shipped any pork to Russia in about a month.

Warehouses in the U.S. held 507.3 million pounds of pork on Sept. 30, up from 484.9 million a year earlier, the USDA said Oct. 22.

U.S. pork exports fell for the third straight month in August to 377.1 million pounds, down 7.9 percent from the previous month, according to the most recent USDA data. The U.S. still sent 3.279 billion pounds of pork abroad in the eight months ended Aug. 31, up 69 percent from a year earlier.

The U.S. dollar rose as much as 1.1 percent today against a basket of six major currencies, limiting the purchasing power of overseas buyers. The index was up 9.4 percent this month through yesterday.

Wholesale pork rose 0.11 cent, or 0.2 percent, to 65.17 cents a pound, the USDA said today. The price is still down 12 percent this month.

Higher Corn Prices

Most hog-futures contracts for settlement in 2009 rose today on concern higher costs for corn feed will encourage livestock producers to shrink their herds next year, Bauer said. Corn rallied today after the government reduced its estimate for this year's crop.

``If the price of inputs goes up, it costs more to feed pigs,'' Bauer said. ``So you're going to put more of a financial bind on producers, and some of them won't make it, and therefore you have fewer numbers.''

Corn production will total 12.033 billion bushels, the USDA said, down 1.4 percent from its Oct. 10 estimate. Corn futures for December delivery rose as much as 6.4 percent.

Cattle futures for December delivery gained 0.1 cent, or 0.1 percent, to 88.875 cents a pound in Chicago. The price has dropped 11 percent this month.

Feeder-cattle futures for January delivery fell 0.6 cent, or 0.6 percent, to 94.1 cents a pound. Yesterday, the price touched 92.6 cents, the lowest since Jan. 24, 2007. Futures have declined 9.3 percent this month.

Wholesale-choice beef gained for a second day, rising 1.31 cents, or 0.9 percent, to $1.4295 a pound, USDA data show. On Oct. 24, the price touched the lowest since April 9. Beef is still down 8 percent this month.

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