By Joanna Newman
AFTER a 10% price rally last week on hopes that the US Department of Agriculture (USDA) would ship pork as food aid to Russia, the market has suffered an attack of pessimism.
The US pig industry urgently needs some such export measure to help alleviate oversupply. However, USDA Secretary Dan Glickman has pointed out that he is still awaiting a formal request from Russia and that any food aid would comprise both grains and meat.
While the hope of immediate exports to Russia has diminished somewhat, the industry still faces growing domestic output next year. Producers are planning to expand in 1999, despite the 40% drop in pig prices from last year.
Economists at the USDA suggest that pig farmers were spared the full impact of the price fall because cheaper feed has helped protect their margins. This has made them more willing to step up their operations.
The Chicago October lean hog futures contract dropped from an intraday high of almost 45¢/lb on Wednesday 14 October to 40.4¢/lb on Tuesday 20 October.
However, the contract recovered some ground on reports of a 17% year-on-year drop in the amount of pork bellies in cold storage, which suggested an improvement in the supply picture for producers. The contract gained 0.7¢/lb on Wednesday 21 October to close at 41.1¢/lb.
Cash prices followed a similar pattern, dropping from 28¢/lb last week to 25¢ on Tuesday but recovering to 27¢ on Wednesday.