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Swine flu tremors rock commodities

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Bloomberg April
Last Updated : Jan 19 2013 | 11:37 PM IST

The outbreak of swine flu has come to haunt the world already facing the blows of a slowing economy, pushing back any chance of a recovery in the near future. Commodities across the world are facing the impact of the outbreak.

Soybean, corn and wheat prices fell on speculation that the outbreak will curb demand for livestock feed and pork.

The World Health Organization will raise its pandemic alert to an unprecedented level today, saying that swine flu is spreading across North America, two people familiar with the agency said. More than 100 deaths linked to the flu occurred in Mexico, and cases have been reported in the US and three other countries. Several nations banned pork from Mexico and the US.

"A pandemic could slow economic activity, cutting into demand for all commodities, grain included," said Dale Durchholz, a senior market analyst at AgriVisor LLC in Bloomington, Illinois, said in a e-mail. "Some in the grain trade fear this could adversely affect world pork trade, cutting into feed demand."

Soybean futures for July delivery fell 25.25 cents, or 2.4 per cent, to $10.0875 a bushel at 10:09 am on the Chicago Board of Trade (CBoT). Earlier, the price tumbled as much as 5.7 per cent. Before today, the most-active contract slid 24 per cent in the past year.

Corn futures for July delivery dropped 6.25 cents, or 1.6 per cent, to $3.795 a bushel. Earlier, the price fell as much as 4.1 per cent. Before today, the price declined 35 per cent in the past year.

Wheat futures for July delivery fell 11.75 cents, or 2.2 per cent, to $5.315 a bushel. Before today, the price slipped 11 per cent this year on increased global production and declining demand for US grain.

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The virus, normally contagious only among pigs, raised concerns that this outbreak may be similar to the spread of the H5N1 bird flu in Asia during the past few years. That disease killed several hundred people and led to the slaughter of millions of chickens and other poultry.

China, Russia, Indonesia and the Philippines have blocked imports of pork from Mexico and parts of the US. China banned shipments from Texas, California and Kansas, according to the country's General Administration of Quality Supervision.

Corn is the biggest US crop, valued at $47.4 billion in 2008, followed by soybeans at $27.4 billion, government figures show. Wheat is fourth, behind hay, at $16.6 billion.

Metals
Copper fell in London on concern that the outbreak may hurt efforts to revive the world economy.

Copper for delivery in three months fell $145, or 3.2 per cent, to $4,325 a tonne by 10:07 am in London.

The metal shed 7 per cent last week, the first weekly drop since March. It reached $4,925 a tonne on April 14, the highest in almost six months, and is up 41 per cent so far this year.

"Copper prices may have reached a top," Credit Suisse Group AG said today in a note. China’s stockpiling agency "has already completed most of its purchases for 2009. Inventories are still at very high levels as real demand remains subdued."

Among other LME metals for three-month delivery, aluminum fell $15, or 1 per cent, to $1,442 a tonne. Lead fell $47, or 3.3 per cent, to $1,388 a tonne, after falling 8 per cent last week.

Zinc shed $45.75, or 3.2 per cent, to $1,374.25 a tonne, after dropping 9 per cent last week. Tin eased 2.4 per cent to $12,300 a tonne and nickel fell $350, or 3 per cent, to $11,200 a tonne after shedding 10 per cent last week.

Cotton Futures
Cotton futures fell for the first time in three sessions in New York on speculation that investors are pushing the dollar higher as demand for safe investments increases with the spread of swine flu.

An index measuring the dollar against six other currencies rose for the first time in a week, gaining as much as 0.8 per cent.

Cotton futures for July delivery fell 0.22 cent, or 0.4 per cent, to 52.48 cents a pound at 10:53 am on ICE Futures US in New York.

Hogs, Pork Bellies Plunge
Hog and pork-belly futures plunged the maximum allowed by the Chicago Mercantile Exchange on speculation that meat demand will shrink with the global spread of swine flu in humans. Cattle futures also dropped.

China, Russia, Indonesia and the Philippines have blocked imports of pork from Mexico and at least parts of the US.

"Consumer fears are going to drive the market today," said Christian Mayer, a market adviser at Northstar Commodity Investments LLC in Minneapolis. "It's going to be a while for people to understand the issue and what the risks are. If you eat properly handled and cooked pork products, they're safe. But it's going to be hyped up, and the initial reaction is going to be panic."

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First Published: Apr 28 2009 | 12:34 AM IST

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