A Pig-Breeding Shift in China Spurs a Rally in Hog Futures in the U.S.

(Bloomberg) -- China, the world’s biggest consumer of pork, appears poised to boost imports, lifting U.S. hog futures from the doldrums.

Spot pig prices in China surged 12 percent since March 8 to the highest in 23 months, and the shares of hog companies are trading at lofty multiples. Investors are betting on a supply squeeze after African swine fever spread to almost all of the Asian nation’s provinces, forcing farmers to cull animals.

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In January, the hog-breeding herd in China fell 15 percent from a year earlier, the Hightower Report in Chicago said. If pork production falls by that percentage in the second half of the year, the country would have to import 1.54 billion pounds a month to maintain supplies, the analyst said.

“The turn higher in China’s pork prices is a bullish force, and it may help pull pork prices from around the world higher, as China is likely to become an active importer,” Hightower said.

On the Chicago Mercantile Exchange, hog futures for June settlement jumped 6.3 percent in the past three sessions to 80.25 cents a pound. On Tuesday, the price reached 80.425 cents, the contact’s highest since Jan. 11. On Feb. 20, the price touched a six-month low, while April hogs slumped to a record.

Funds are unwinding bets on a decline, and speculators are anticipating supply concerns, according to Steiner Consulting Group in Manchester, New Hampshire.

--With assistance from Isis Almeida.

To contact the reporters on this story: Lydia Mulvany in Chicago at lmulvany2@bloomberg.net;Michael Hirtzer in Chicago at mhirtzer@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Patrick McKiernan

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