USDA to buy $30 million in pork to help farmers

By Christopher Doering

WASHINGTON (Reuters) - The U.S. government plans to buy another $30 million in pork products in fiscal 2009 for federal food assistance programs to help the flailing hog industry, U.S. Agriculture Secretary Tom Vilsack said on Thursday.

But pork futures prices fell on the news, as traders at the Chicago Mercantile Exchange had expected a bigger aid package, and said $30 million will do little to help the beleaguered sector because of a glut of pork in storage.

"Quantity-wise, that's a drop in the bucket," said John Kleist, broker-analyst with Allendale Inc. "We have enough in the freezer that they (USDA) could take and not even put a dent in the freezer for $30 million."

USDA has bought about $151 billion of pork so far this fiscal year, which ends this month.

The hog industry, which has been losing money since October 2007, has been battered by a slumping global economy at a time when some traditional importers, such as China, have been producing more of their own pork.

Producers were also hurt when some countries banned pork imports on H1N1 flu fears, even though health officials say the virus, originally known as swine flu, is not linked to meat products.

"These purchases will assist pork producers who are currently struggling due to depressed market conditions and reflects the Obama Administration's ongoing work to support struggling producers," Vilsack said.

Pork farmers said they were grateful for the support, although they had asked USDA to buy $150 million in pork, including $50 million in fiscal 2009.

"The pork purchase and the ongoing efforts to reopen export markets are important steps that will help our industry bring pork supply and demand back into balance and allow producers to continue providing consumers worldwide with economical, nutritious pork products," said Don Butler, president of the National Pork Producers Council, in a statement.

Analysts have said the U.S. hog herd may need to shrink to drive up pork prices because of the lack of demand.

In its monthly agricultural report released last month, the USDA forecast 2009 exports would slump to 4.183 billion lbs, a drop of 10 percent from last year.

Exports in 2010 were forecast at 4.45 billion lbs.

(Additional reporting by Jerry Bieszk;

(Editing by David Gregorio)