Russian donation plan boosts US hog futures

By Joanna Levin

HOG futures prices climbed over the past couple of days on news that the US Department of Agriculture has proposed donating pork and chicken to Russia in food aid.

This was welcome news for the US pork industry, which has suffered from a drop in exports to Russia over recent months as a result of Russias economic turmoil. The amount of pork aid exports have not yet been decided but could help alleviate US oversupply. Two weeks ago, the USDA reported a 3% annual rise in the national pig inventory to 62.9 million head as at 1 September.

In reaction to the USDA proposals, the Chicago November lean hog futures contract gained 2¢/lb on Wednesday 7 October to close at 40.6¢/lb, unchanged from a week ago.

However, the cash prices paid by US slaughterhouses has dropped sharply over the past week due to ample supply and high seasonal activity. The weekly pig run topped the 2 million head slaughtered in the week ending 3 October, up from 1.998 million head the previous week and 1.813 million head at this time last year.

As a result of the heavy slaughter activity, packers do not need to be aggressive with their bids. Cash prices have dropped to 26.00-27.00¢/lb, from 31.00-31.50 at the end of last week.