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U.S. pork stocks again swell to record high as pig virus strikes

By Theopolis Waters

CHICAGO (Reuters) - The amount of pork in U.S. cold storage warehouses in February reached a record high for a third straight month, according to the U.S. Department of Agriculture's monthly cold storage report issued on Friday.

Friday's USDA report showed February total pork inventories at 653.8 million lbs, topping February 2013's record of 633.4 million.

Analysts attributed last month's bloated stocks partly to processors and retailers salting away pork to avoid a potential supply crunch during the spring and summer peak barbecue seasons, especially if production declines as a deadly pig virus sweeps through U.S. farms.

The disease is fatal to baby pigs and has already shrunk the number of available market-ready hogs, pushing those prices and costs for wholesale pork to record highs.

"End users and processors were stocking up on supplies ahead of the expected deficit in production due to the virus," said Allendale Inc chief strategist Rich Nelson, citing the Porcine Epidemic Diarrhea virus, known as PEDv.

Dan Vaught, an economist with Doane Advisory Services, said hog and pork prices are vulnerable to a "substantial reversal" if the majority of those buying hogs and pork now, as a hedge against a potential summer supply shortfall, have purchased all they need.

Since being detected in the United States in May 2013, PEDv has been confirmed on more than 4,700 farms in 27 states, according to USDA's National Animal Health Laboratory Network.

There is no official count regarding the number of pigs that died from the disease. But some economists estimated losses of at least 4 million hogs with the most severe impact on production expected this summer. The country's hog herd stands at 65.9 million head.

All eyes will be on USDA's quarterly hog report on March 28. The data should provide an official account of hog production over the past 3 months and what is expected this summer.

Analysts said most of last month's pork stock increase was due to the storage of pork bellies, which are processed into bacon, and of hams.

Ham storage rises in preparation for the Easter holiday. And pork bellies are put on ice for months ahead of the summer when bacon-lettuce-tomato sandwiches are popular.

Total belly storage last month was 88.3 million lbs, a 1.1 million lbs increase from the end of January and 45.3 million lbs more than a year earlier.

In February, ham stocks totaled 117.2 million lbs, up 11.0 million from the month before and a 6.4-million lbs gain verses a year ago.

BEEF STOCKS DOWN WITH SUPPLIES

Friday's government data showed February beef inventories totaled 407.1 million lbs, down 22.2 million from January and 82.9 lbs lower than in February 2013. Last month's beef stocks were the smallest for the month since 405.5 million in 2010.

Last month, cattle in the U.S. Plains suffered through harsh weather that disrupted transportation of livestock to market and slowed down animal weight gains.

Market-ready cattle were already scarce after years of drought hurt crops, trimming the herd to the lowest in 63 years at 87.730 million head. Tight cattle numbers last month fueled record-high prices for cattle as well as costs for beef at the wholesale and retail levels.

Diminished production in February and fewer numbers of cattle placed in feedlots last summer through early autumn resulted in the continued drawdown in beef stocks, said Nelson.

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