LIVESTOCK-Hogs at 3-mth high as China plans lifting ban

(Updates with Russia buying ham, adds quotes, byline)

By Jerry Bieszk

CHICAGO Oct 29 (Reuters) - Hog futures rose for a fourth straight day to fresh three-month highs on Thursday as China signaled it would lift a five-month ban on U.S. pork put in place after the outbreak of the pandemic H1N1 flu.

Trading in hog futures at the Chicago Mercantile Exchange was exceptionally heavy at nearly 10,000 contracts in the benchmark December position alone.

Shares of Smithfield Foods Inc (SFD.N), the largest U.S. hog and pork producer, rose 65 cents, or 5 percent, to $13.85, on expectations of increased exports to China.

Traders and analysts said news that China would soon announce it would lift its ban on pork from the United States supported hog futures, along with continued buying by funds that were largely responsible for gains the past three days.

The market also got a lift from talk that Russia, a major market for U.S pork, was buying ham from the United States.

The unexpected rally saw players who had bet that the market will go lower, scrambling to cancel out their short, or sold, positions, by buying hog futures.

"Russia bought some hams, they (prices) were up pretty good last night and potentially China is going to come back into our hog market," said Bill Cipolla, an independent hog trader.

The U.S. Agriculture department on Wednesday afternoon said the average cash price for ham rose $4.84 to $55.69 per cwt.

U.S. Agriculture Secretary Tom Vilsack and Trade Representative Ron Kirk, who were visiting China, said on Thursday that Beijing planned to lift its ban on U.S. pork.

"Based on our discussions, we expect China to base its opening on science and internationally agreed standards," Kirk said in a news release.

Kirk and Vilsack met their Chinese counterparts for talks in Hangzhou, China, this week. They, however, did not specify when China would lift it's ban.

China imported $560 million of U.S. pork in 2008, primarily to ensure sufficient supplies during the Olympic Games hosted by Beijing last August. Imports have since dwindled, with China also taking steps to increase its domestic hog herd.

"While this is good news, we don't see any lasting surge in buying of pork. They don't want the product," said Rich Nelson, analyst with brokerage and research firm Allendale Inc.

December lean hogs 2LHZ9 rose 1.525 cents, or nearly 3 percent, to 57.475 cents per lb at 11:36 a.m. CDT (1636 GMT). It was hovering around 56.200 cents before the China news.

WEAK DOLLAR HELPFUL

Traders and analysts said there were other factors at play in the rally of hog futures, like the weak U.S. dollar, buying by investment-speculative funds and commercials.

A weak dollar will help bolster U.S. exports. The dollar index .DXY was down 0.68 percent against a basket of currencies after data showed the U.S. economy returned to growth in the third quarter, reducing the greenback's safe haven allure and sending investors to other assets.

"It's friendly news, but they (futures) already had a big rally of about 5 cents in the last week or so. I think December will run into some head winds at 58 to 59 cents," said Peter Adams, principal at PNM Trading.

"If and when they start importing more pork, I don't know if it will be in time to help the December (contract) out," he added.

There was underlying support from a note the U.S. Meat Export Federation sent to members on Wednesday that the spread of African Swine Fever, a deadly hog disease, to near St. Petersburg could threaten Russia's attempts to become self-sufficient in pork production. (Reporting by Bob Burgdorfer and Jerry Bieszk; Writing by K.T. Arasu; Editing by Marguerita Choy)