Smithfield, Tyson Decline Amid Swine-Flu Outbreak (Update1)
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By Choy Leng Yeong

April 27 (Bloomberg) — Smithfield Foods Inc., the world’s largest pork processor, and Tyson Foods Inc. fell in New York trading on speculation that the swine-influenza outbreak will decrease consumption of pork.

Smithfield declined $1.37, or 13 percent, to $8.95 at 10:05 a.m. in New York Stock Exchange composite trading. Tyson dropped $1, or 9.1 percent, to $9.93.

Consumers have begun to ask fresh-meat departments at groceries around the country whether pork can transmit the virus, Ken Goldman, a JPMorgan Chase & Co. analyst, wrote today in a note. Goldman lowered his estimates for Tyson and Smithfield earnings this year.

“Though there is no evidence that swine flu can be obtained by eating pork, the fear generated by a disease named after hogs cannot be good for pork consumption,” Goldman said.

Smithfield said yesterday that it has found “no clinical signs or symptoms” of swine influenza in its swine herd or its employees at its joint ventures in Mexico. Keira Ullrich, a spokeswoman for Smithfield, didn’t immediately return a message seeking comment today.

Springdale, Arkansas-based Tyson, which got about 13 percent of its revenue from pork in its previous fiscal year, will have an operating loss of about 23 cents a share in its current fiscal year, compared with an earlier estimate for profit of 22 cents, Goldman said. Gary Mickelson, a Tyson spokesman, didn’t return a message seeking comment.

Smithfield, based in the Virginia city of the same name, will have an operating loss of $1.68 a share in the current fiscal year, wider than an earlier projection for a $1.51 loss, he said.

Mexico Outbreak

The number of deaths from Mexico’s flu outbreak has risen to 103, and cases have been reported in the U.S., Canada and Spain. New Zealand said as many as 13 students may have swine flu.

Swine flu is a respiratory disease of pigs caused by type-A influenza that regularly leads to outbreaks among the animals, according to the U.S. Centers for Disease Control and Prevention. Three main human flu strains — H3N2, H1N1 and type B — circulate and cause 250,000 to 500,000 deaths a year in seasonal epidemics, according to the World Health Organization.

Swine-flu viruses aren’t transmitted by food, and eating properly handled and cooked pork and pork products is safe, according to the CDC.

To contact the reporter on this story: Choy Leng Yeong in Seattle at clyeong@bloomberg.net.

Right now health officials around the world are trying to take precautions without inciting panic. Here are just a few of the questions facing them – and ultimately, us as well:
1. Is this a flu pandemic?

The influenza virus is constantly mutating. That’s why we can’t get full immunity to the flu, the way we can to diseases like chicken pox, because there are multiple strains of the flu virus and they change from year to year. However, even though the virus makes us sick, our immune systems can usually muster enough of a response so that the flu is rarely fatal for healthy people.

But every once in awhile, the virus shifts its genetic structure so much that our immune systems offer no protection whatsoever. (This usually happens when a flu virus found in animals – like the avian flu still circulating in Asia – swaps genes with other viruses in a process called reassortment, and jumps to human beings.) A flu pandemic occurs when a new flu virus emerges for which humans have little or no immunity and then spreads easily from person to person around the world. In the 20th century we had two mild flu pandemics, in 1968 and 1957, and the severe “Spanish flu” pandemic of 1918, which killed an estimated 40 to 50 million people worldwide.

The WHO has the responsibility of declaring when a new flu pandemic is underway, and to simplify the process, the U.N. body has established six pandemic phases. Thanks to H5N1 avian flu, which has killed 257 people since 2003 but doesn’t spread very well from one human to another, we’re currently at phase 3. If the WHO upgraded that status to phase 4, which is marked by a new virus that begins to pass easily enough from person to person that we can detect community-sized outbreaks, such a move would effectively mean that we’ve got a pandemic on our hands.

The H1N1 swine flu virus has already been identified as a new virus, with genes from human and avian flus as well as the swine variety. And since it is apparently causing large-scale outbreaks in Mexico, along with separate confirmed cases in the U.S. and Canada and suspected cases in other countries, it would seem that we’ve already met the criteria for phase 4. But though an emergency committee met on April 25 to evaluate the situation, the WHO hasn’t made the pandemic declaration yet. Keiji Fukuda, the WHO’s interim assistant director-general for health, security and environment, said on Sunday that its experts “would like a little bit more information and a little bit more time to consider this.” The committee is set to meet again by April 28 at the latest.

As health officials have repeatedly emphasized, with good reason, the swine flu situation is evolving rapidly, and more lab tests are needed to ascertain exactly what is going on in Mexico and elsewhere. “We want to make sure we’re on solid ground,” said Fukuda, a highly respected former CDC official and flu expert.

2. What will happen if this outbreak gets classified as a pandemic?

Moving the world to pandemic phase 4 would be the signal for serious containment actions to be taken on the national and international level. Given that these actions would have major implications for the global economy, not to mention the effects of the public fear that would ensue, there is concern that the WHO may be considering politics along with science. “What the WHO did makes no sense,” says Osterholm. “In a potential pandemic, you need to have the WHO be beyond question, and (April 25) was not a good day for them.”

Of course, declaring a pandemic isn’t a decision that should be taken lightly. For the WHO, phase 4 might trigger an attempt to keep the virus from spreading by instituting strict quarantines and blanketing infected areas with antivirals. But we appear to have missed the opportunity to contain the disease at its source since the virus is already crossing borders with ease. “We cannot stop this at the border,” said Anne Schuchat, the CDC’s interim director for science and public health. “We don’t think that we can quench this in Mexico if it’s in many communities now.”
See the top 10 medical breakthroughs of 2008.

See TIME’s pictures of the week.

That would leave the WHO and individual countries to fall back on damage control, using antivirals and old-fashioned infection control – like closing schools, limiting public gatherings and even restricting travel – to slow the spread of the virus. But such efforts would likely inflict serious damage on an already faltering global economy – and the truth is, we don’t know how well those methods will work.

3. Why have the U.S. cases been so much milder than the ones in Mexico?
This is the question that has health officials from Geneva to Washington puzzled. In Mexico, swine flu has caused severe respiratory disease in a number of patients – and even more worryingly, has killed the sort of young and healthy people who can normally shrug off the flu. (Fueling such concerns is the fact that similar age groups died in unusually high numbers during the 1918 pandemic.) Yet the cases in the U.S. have all been mild and likely wouldn’t have even garnered much attention if doctors hadn’t begun actively looking for swine flu in recent days. “What we’re seeing in this country so far is not anywhere near the severity of what we’re hearing about in Mexico,” said the CDC’s Besser. “We need to understand that.”

Some of the difference may be due to the fact that Mexico has apparently been grappling with swine flu for weeks longer than the U.S. As doctors across the U.S. begin checking patients with respiratory symptoms for swine flu, CDC officials expect to see more severe cases in the U.S. as well – and as better epidemiological work is done in Mexico, we’ll probably hear about more mild cases there too. Right now, however, the true severity of the H1N1 swine flu virus is still an open question, whose answer could change over time. The 1918 Spanish flu pandemic began with a fairly mild wave of infections in the spring, but the virus returned a few months later in a far more virulent form. That could happen with the current swine flu as well. “It’s quite possible for this virus to evolve,” said Fukuda. “When viruses evolve, clearly they can become more dangerous to people.”

4. How ready is the U.S. – and the world – to respond to a flu pandemic?

In some ways, the world is better prepared for a flu pandemic today than it has ever been. Thanks to concerns over H5N1 avian flu, the WHO, the U.S. and countries around the world have stockpiled millions of doses of antivirals that can help fight swine flu as well as other strains of influenza. The U.S. has a detailed pandemic preparation plan that was drafted under former President George W. Bush. Many other countries have similar plans. SARS and bird flu have given international health officials useful practice runs for dealing with a real pandemic. We can identify new viruses faster than ever before, and we have life-saving technologies – like artificial respirators and antivirals – that weren’t available back in 1918. “I believe that the world is much, much better prepared than we have ever been for dealing with this kind of situation,” said Fukuda.

At the same time, the very nature of globalization puts us at greater risk. International air travel means that infections can spread very quickly. And while the WHO can prepare a new swine flu vaccine strain in fairly short order, we still use a laborious, decades-old process to manufacture vaccines, meaning it would take months before the pharmaceutical industry could produce its full capacity of doses – and even then, there wouldn’t be enough for everyone on the planet. The U.S. could be particularly vulnerable; only one plant, in Stillwater, Penn., makes flu vaccine in America. In a pandemic, that could produce some ugly political debates. “Do you really think the E.U. is going to release pandemic vaccine to the U.S. when its own people need it?” asks Osterholm.

See the top 10 medical breakthroughs of 2008.

See TIME’s pictures of the week.

Indeed, the greatest risk from a pandemic might not turn out to be from the swine flu virus itself – especially if it ends up being relatively mild – but what Osterholm calls “collateral damage” if governments respond to the emergency by instituting border controls and disrupting world trade. Not only would the global recession worsen – a 2008 World Bank report estimated that a severe pandemic could reduce the world’s GDP by 4.8% – but we depend on international trade now for countless necessities, from generic medicines to surgical gloves. The just-in-time production systems embraced by companies like Wal-Mart – where inventories are kept as low as possible to cut waste and boost profit – mean that we don’t have stockpiles of most things. Supply chains for food, medicines and even the coal that generates half our electricity are easily disruptable, with potentially catastrophic results. Though we’ll likely hear calls to close the border with Mexico, Osterholm points out that a key component used in artificial respirators comes from Mexico. “We are more vulnerable to a pandemic now than at any other time over the past 100 years,” he says. “We can’t depend on ourselves.”

5. So how scared should we be?

That depends on whom you ask. Officials at the CDC and the WHO have emphasized that while the swine flu situation is serious, they’re responding with an abundance of precautions. Even Osterholm, who has been highly critical of the U.S. government’s long-term failures to better prepare for a pandemic, gives the CDC a 9 out of 10 for its response so far. Outside of Mexico, the swine flu hasn’t looked too serious yet – unlike during the SARS outbreaks of 2003, when an entirely new virus with no obvious treatment took the world by surprise. In the U.S., the normal flu season is winding down, which should make it easier for public-health officials to pick out swine flu cases from run-of-the-mill respiratory disease. And there are simple things that people can do to protect themselves, like practicing better hygiene (wash hands frequently and cover mouth and nose when sneezing) and staying away from public places or traveling if they feel sick. “There’s a role for everyone to play when an outbreak is ongoing,” said Besser.

But the truth is that every outbreak is unpredictable, and there’s a lot we don’t know yet about the new swine flu. There hasn’t been a flu pandemic for more than a generation, and there hasn’t been a truly virulent pandemic since long before the arrival of mass air transit. We’re in terra incognito here. Panic would be counterproductive – especially if it results in knee-jerk reactions like closing international borders, which would only complicate the public-health response. But neither should we downplay our very real vulnerabilities. As Napolitano put it: “This will be a marathon, not a sprint.” Be prepared.

From the folks at www.jurojinweekly.com website

INTO EACH LIFE SOME RAIN MUST FALL

The convenience of converting frozen orange juice concentrate into juice rather than squeezing oranges at home is a good example of how technology in the agriculture industry has helped convert a low revenue industry into an enormous one. By the turn of the century the frozen concentrate orange juice (FCOJ) market was worth $1.3 billion annually. Back in 1945 the Florida Department of Citrus invented the process and three years later sold the patent to the U.S. government. It was this step that helped to make the frozen food industry commercially viable.

But since 2000 according to the USDA’s National Agricultural Statistics Service, acreage given over to American production of oranges has fallen from 820,000 acres to just 660,000. As a result production of 13 million tons in 2000 fell to 10.1 million in the 2008 crop.

Prices too have dropped and in the current futures market at around 80 cents per pound, FCOJ futures prices are at almost half the $1.50 per pound of about one year ago. That’s bad news for citrus growers who could sell a box of oranges for $6.20 in March 2008, but could only fetch $5.06 last month. In the bigger picture they are still achieving 36 cents per box less than the average price of 1990-92. And that’s before allowing for inflation!

There are a couple of things going on. First of all, orange juice, although far more palatable than crude oil, is still just another commodity. Its price is subject to supply and demand factors and despite the bigger picture contraction in U.S. supply, global capacity has picked up. Other regions, notably Brazil, dictate the price of juice more so than the Florida grove growers do. Florida, by the way produces around 77% of all oranges used for pressing while Californian oranges, which are typically better to eat make up 21% of what goes into the big squeeze.

As an overhang of last year’s global crop there was more of an inventory than usual and so despite expectations of a similar 51 million ton crop in 2009, unchanged from 2008, more is being carried over from last year. In addition it was earlier forecast the world’s largest producer might have a larger crop than expected and so allow it to exert heavier than usual pricing pressure. Lately, the word is that this is simply not the case and we should expect less out of Brazil this year.

As a commodity, orange juice has suffered just like any other. Don’t forget that crude oil traded down by around $110 bucks per barrel from its $147 peak last July. And so the halving of juice prices means it gets off rather lightly! But there has been another dynamic at play. While you might not think so, orange juice is still sensitive to what’s happening in the real economy. If you think about it, you’re faced with a choice in the supermarket: Buy OJ or buy apple juice or even forget them both and save a couple of dollars by drinking from the tap. Well in aggregate, that challenge to real demand has hampered the price of juice.

While both the U.S. and Egypt might be falling short in orange production there’s always someone else to plug the gap – and while in this case it might not be Brazil, expectations are than Argentina and Chile will produce more this year. On the demand side the changing tastes of European consumers has shown a preference for more exotic fruit juices, leaving demand for OJ slightly down.

In the last several weeks the consistent selling pressure in the OJ futures suddenly turned and technically speaking the turnaround is long overdue. There has been concern over Florida’s shrinking crop. Early extreme heat dry weather caused many young fruit to simply drop off the trees – yet prices continued to tumble. Signs of a classic bear market were rather evident. But the market suddenly turned as more and more days passed by when Florida went with hardly any rain increasing the potential for further crop damage.

The orange juice market is hotting up to be an interesting one heading into warmer weather now. We believe that there is a good chance that the fundamentally diminishing crop supply coupled with the pessimism conveyed in juice futures makes for solid odds that the new crop could see a significant rebound over the early part of the summer. The pick-up in enthusiasm took a nose-dive earlier this week when the clouds burst over some, but not all parts of the citrus groves in Florida.

We think that gives a good time to consider our options on FCOJ.

Watch The Dust Bowl Disaster at EncycloMedia.com

From a GCA reader!

I recently asked my friend’s little girl what she wanted to be when she
grows up. She said she wanted to be President some day. Both of her
parents, liberal Democrats, were standing there, so I asked her, ‘If you
were President what would be the first thing you would do?’

She replied, ‘I’d give food and houses to all the homeless people.’

Her parents beamed.

‘Wow…what a worthy goal.’ I told her, ‘But you don’t have to wait
until you’re President to do that. You can come over to my house and mow
the lawn, pull weeds, and sweep my yard, and I’ll pay you $50. Then I’ll
take you over to the grocery store where the homeless guy hangs out, and
you can give him the $50 to use toward food and a new house.’

She thought that over for a few seconds, then she looked me straight in
the eye and asked, ‘Why doesn’t the homeless guy come over and do the
work, and you can just pay him the $50?’

I said, ‘Welcome to the Republican Party.’

Her parents still aren’t speaking to me.

The rush to find a scapegoat for high food prices last year largely led to the “burning at the stake” of farmers and those involved in corn based ethanol production…now clearly that was largely overdone. Let’s face it, the facts are that corn based ethanol is not the best alternative longer term but it is however the only truly viable and abundant source right now as an additive to our gasoline supply. Ethanol mandates have been at 10% for along, long time but now are set to rise as much as 13%, so actually ethanol demand is going to significantly increase, not drop.

Frighteningly though, we have less farmers who are able to plant corn do to ever increasing input costs and a lower cash corn cost. On top of all of that ethanol plants (at least 30 of them) have been shuttered and many elevators have gone bankrupt. All and all this is shaping op to be a disaster.

Before we rush to blame farmers for this debacle and the media runs to blame “failed Bush” policies, take a closer look at what is really going on, and the next time you go to the grocery store take a minute to think where that carton of milk and that bread really came from!

From JurojinWeekly.com

GOLD’S COLD SHOULDER

It’s been one month since the Fed announced the onset of quantitative easing stating that it would buy mortgage securities and government debt. According to a Bloomberg survey taken since that time, investors unambiguously turned dollar bearish as a result, sensing that the government was diluting and debasing the dollar in order to get out of a tight corner. By creating future inflation, the massive budget deficit would be made smaller, but at the cost of a shrinking dollar.

April gold reversed course from a low of $882 that day to a $967 peak just 48 hours later as investors considered the implications of the Fed’s move not to mention a record one-day fall in the value of the dollar by 3.4%. The dollar lost 10 cents versus the euro in the space of three days, which helped reflate commodity prices.

This week, gold received what should have been rocket fuel for gold bugs. But it just couldn’t muster a rally back above $900 midweek. That despite news that U.S. consumer prices fell in the year through March at a 0.4% clip for the first time since 1952. Yet investors seem reticent to buy into the notion that deflation or falling prices are set to take hold except for in the immediate short-run thanks to the very evident global recession. Once the corner has been turned, so they say, inflation will be the order of the day.

But as sure as investors are adopting a glass-half-full approach in response to decidedly mixed economic data these days, they are losing their appeal for gold.

The dollar has taken back much of the losses it was dealt after the fed’s announcement. On Wednesday it touched $1.3125 against the euro – it’s strongest since the announcement. Just a half a cent more and the reversal will have dollar bulls counting their eggs and screaming about an assault on the 2009 euro low of $1.2320. None of this is good for gold.

The European Central Bank and the governments of the collective Eurozone are likely to embark on their own quantitative easing given the alarming dislocations with European economies. Again, euro weakness is the flipside of a strengthening dollar and not a bullish angle for gold.

The Japanese yen has stopped rallying. Investors throttled the yen so hard in an effort to diversify away from risk and into safe havens that they virtually strangled the Japanese economy en route. Now the yen is losing ground sending another mixed signal gold’s way.

The economic data, as we already noted is decidedly mixed. For sure, the data is decelerating in regards to just how weak it is, but whether the economy is at a turning point is well open to debate. But that doesn’t stop equity bulls joining the rally for fear of missing the boat leaving the dock. One again, a return of risk appetite is not doing the price of gold any favors at this point.

One of the biggest heavyweight problems facing the U.S. economy is the oversupply of housing. But with mortgage demand up outside of refinancing agreements and some evidence that construction weakness may have run its course, investors are hoping for better times ahead. Such an optimistic stance doesn’t make us want to buy gold at this stage.

Meanwhile over in China, the demand from infrastructure projects for copper has created something of a price frenzy. Normally gold would join in, but it’s not in a sign that local demand is based on real underlying demand for projects rather than speculation.

The equity market’s fear gauge or CBOE Volatility index known as the VIX closed at a near 7-month low on Wednesday convincingly cracking through the floor of 40.0 that has held since September. It would seem that investors are taking the economic data to heart and making the plain statement that the second quarter of 2009 will be the ultimate washout before things start to improve. Again, not quite the sexy thought that gold bulls want to hear last thing at night.

It’s beginning to look like a test of $800 per ounce might be on the cards near-term for gold as optimism abounds. You can bet your bottom dollar that the banks’ Stress Testing results will be seen as a market positive.

The silver lining here is that gold’s demise might just be built on a rather sandy foundation. Economists might yet prove to be right about the dollar or the ongoing economic slump. It won’t feel like that when nervous longs are diving out of gold at $800, but that might just be the golden opportunity to get in on the long side.

Despite several reports confirming that ethanol and corn prices had a small role in rising food prices, Bob Stallman, President, American Farm Bureau Federation; Tom Buis, CEO, Growth Energy; Roger Johnson, President, National Farmers Union; along with Rick Tolman jointly called for Congress to hold new hearings to determine why food prices are still on the rise. Johnson said that, “We’d love to see the same witnesses who blamed farmers in Congressional hearings last year.”
From Ag Wired.com
Tolman stated, “Our farmers are owed a huge apology for the damage they have done to farmers in the eye of the consumer.” He noted that agricultural technology continues to improve each year and that 2007 and 2008 have seen record corn bushels on decreased acres and this trend is expected to continue in 2009 and beyond.

The group reiterated the importance of ethanol in reducing America’s dependence on oil and stressed the importance of increasing the blend wall to 15 percent (E15) in order for the country to meet the goals laid out in the Renewable Fuels Standard (RFS).

Full story at Marketwatch.com

ASIA MARKETS
China keeps hold on commodities reins
Oil, mining shares mixed, with China’s outlook uncertain

By Myra P. Saefong, MarketWatch
Last update: 4:15 a.m. EDT April 16, 2009
TOKYO (MarketWatch) — Oil and metals mining shares traded on a mixed note in the Asian markets Thursday, as analysts stressed that China remained a key force that will ultimately decide the fate of demand for most major global commodities.
And while economic growth in China appears to be improving, the outlook remains uncertain.
On Thursday, government data showed that the nation’s economy grew a slightly better-than-expected 6.1% in the first quarter from a year earlier, after expanding 6.8% in the fourth quarter. See full story on China economic data.
Overall, “China continues to walk a very thin tightrope” and growth remains “below the optimal level to avoid major civil unrest,” said Kevin Kerr, editor of Global Commodities Alert.
But that also means that “demand for key commodities such as energy and agriculture, industrial metals and soft commodities will continue to be brisk in China as they try to stave off a major collapse by continuing to use every means possible to stimulate the economy and create infrastructure projects,” he said.
“China will clearly be the driving force in commodities during this cycle and perhaps for decades to come,” he said.