September 24, 2013 / 5:06 PM / in 4 years

LIVESTOCK-Pig virus speculation boosts U.S. hog futures

* Hog futures' discount to cash motivates buyers
    * Traders indifferent to Smithfield deal approval

    By Theopolis Waters
    CHICAGO, Sept 24 (Reuters) - Chicago Mercantile Exchange hog
futures climbed 3.2 percent Tuesday on speculative buying
tied to the spread of the Porcine Epidemic Diarrhea (PEDv) pig
virus, traders and analysts said.
    PEDv, which is deadly to baby pigs, could reduce the number
of hogs coming to market in the coming months.
    "Some people are waking up to how severe this PEDv virus is,
which may have been under reported," said Linn Group analyst
John Ginzel.
     He said some traders are buying futures based on initial
forecasts for the U.S. Department of Agriculture's quarterly
hogs and pigs report. The data will be released on Friday at 2
p.m. CDT (1900 GMT)
     October hog futures marked a new high for the contract,
driven by its discount to CME's hog index, which was at 98.25
     At 11:45 a.m. CDT (1645 GMT) October was at 93.000
cents. It was up 2.825 cents and hit a new contract high of
93.150 cents.
     Anticipation about the impact of the pig virus and
undervalued futures overshadowed word of the approved sale of
Smithfield Foods Inc to Chinese firm Shuanghui
International Holdings Ltd. 
    Smithfield shareholders on Tuesday approved the pork giant's
$4.7 billion sale to Shuanghui in what is shaping up as the
biggest acquisition of a U.S. company by a Chinese firm.
    The Smithfield buyout is expected to increase U.S. pork
exports to China at some point, but it is too early to tell,
said Citigroup futures specialist Art Liming.
    "I think the futures' discount to cash probably has more to
do with today's rally than the Smithfield news. It looks like
cash hog prices are going to stay fairly supportive," he said.
    "The Smithfield news doesn't hurt, but it was fairly cooked
into the market that it would be approved," Liming said.
    USDA's Tuesday morning data reported the average hog price
in the most-watched Iowa/Minnesota market at $94.84 per cwt,
$2.92 higher than on Friday.
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