CHICAGO, Ill. (Reuters) — American livestock and meat market traders are expecting at least a month of volatile trading while Europe learns if it has succeeded in containing foot-and-mouth disease.
“We are looking toward the beginning of April to say, ‘We now think the outbreak is over,’ “said Richard Ali, the United States Meat Export Federation’s director for Europe, Russia and the Middle East.
U.S. cattle and hog prices were sharply higher on March 5 at the Chicago Mercantile Exchange on hopes that U.S. meat exporters will claim a larger share of the lucrative Japanese and South Korean meat markets after those two nations temporarily banned meat imports from some European countries including Denmark, a huge pork exporter.
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Japan lifted its ban on Denmark on March 6 after a suspected case of foot-and-mouth disease there proved to be negative, trimming back some CME prices for hogs and pork bellies. But more market volatility can be expected until the contagious disease’s spread in Europe is contained.
“There are very few meat traders here that would place bets on what will happen,” Ali said.
France appeared to have been spared the disease outbreak that has hit Britain, where more than 60 cases of foot-and-mouth disease have been uncovered. That has prompted widespread quarantines, the slaughter of thousands of animals for safety measures, and millions of dollars in lost earnings.
Should the disease reach the European continent and if meat exports are suspended from key producers like Denmark, Ali said pork from the U.S., Canada, and Australia would most likely fill the resulting void in the huge Asian market.
“Those are really the only countries that could supply that market,” he said.
Last year, Japan imported 650,595 tonnes of pork, with 210,000 coming from Denmark.
However, should Europe succeed in containing the disease, analysts said the U.S. beef and pork industries should still have a good year. There is strong domestic and export demand for meat and profitable cattle and hog prices can be expected for most of the year.
“Demand has been surprisingly strong and it has lasted longer than any analyst anticipated,” said Harry Baumes, senior vice-president of industry and agriculture for the economic consulting firm WEFA Inc.
Cattle prices should be profitable because fewer cattle will keep beef production down. Herd expansion in 2001 should also keep more heifers on ranches and away from slaughter.
U.S. pork sales may be receiving an added boost from consumers who are turning away from higher-priced beef.
“We are seeing some substitution at the consumer level,” said Chris Hurt, an agriculture economist at Purdue University.
“They are buying more pork instead of beef.”
U.S. pork exports were up 12 percent on volume last year and u-10-p 18 percent in value. Beef exports were u-10-p 10 percent in volume and 11 percent in value.
The U.S. Department of Agriculture expects pork exports this year to rise to a record 593,000 tonnes, up three percent. USDA said European consumers are expected to keep turning away from beef on lingering concerns about bovine spongiform encephalopathy.
