The hog market was reeling for a second week amid fears of the flu virus that has infected more than 1,000 people around the world. About 20 countries have banned imports of pork, pigs and other meat from the United States, Canada and Mexico.
For the first time, the current strain of flu was detected in a herd of pigs over the weekend. The animals, in Canada, were infected by a person who had been to Mexico.
The number of hogs slaughtered by U.S. meat packers on Saturday tumbled 63 percent from a year ago, as the import bans took a toll on trade.
Buy orders from retailers also could be dropping, even though this strain of H1N1 flu is now passing from human to human and not being passed along by pigs.
MF Global Research analyst Rich Feltes wrote in a note to clients that "our sources indicated that retailers slowed pork orders last week, taking a 'wait and see' posture on whether domestic pork demand was indeed damaged.
"There has still been no transmittal from pigs or pork to humans, so the battle is not lost, but a continuation of 'wait and see' ordering could put more pressure on markets."
Flu Strain Found in Canadian Pigs
Detection of the virus in the herd of Canadian pigs sparked Monday's sell-off in hogs.
The Canadian Food Inspection Agency stressed the incident posed no threat to the food supply.
But Canada Pork International, an export promotion group, said pork exports have dropped 10 to 15 percent since the virus was detected in a swine herd.
Canada exported 1.1 million tonnes of pork last year, accounting for more than half of its production.
The U.S. Meat Export Federation said last week the bans had cut U.S. pork exports 8 percent to 12 percent. Pork sales to Mexico has slowed as people stayed indoors.
Dealers in U.S. cash hog markets said prices could take weeks to recover. Before the outbreak, hog prices had started to trend seasonally higher as the onset of spring grilling season boosted demand. Also, the animals typically gain weight more slowly in warmer weather, limiting availability of pork.
With fewer hogs going to slaughter, prices will likely decline further, hog dealers said.
Some traders at the Chicago Mercantile Exchange said the sell-off on Monday was unwarranted.
"I think it was an overreaction to the Canadian story," said Chicago Mercantile Exchange hog trader James Burns.
"We opened lower and subsequently broke pretty hard and now we are starting to see some commercial and speculative buying coming in here," he added.
The lightly traded May hog contract is down about 20 percent from April 23. The sell-off began in the last 10 minutes of trading on April 24. The active June 2LHM9> is down 10 percent over the same period to Monday.
At 12:28 p.m. CDT (1728 GMT), May hogs were down 2.425 cents at 55.050 cents per lb and actively traded June was down 1.075 cents at 64.500.
