CHICAGO (Bloomberg) - Pork, the fastest-growing US meat export of the past decade, is sick with swine flu.

Hog futures, the second-worst commodity investment of 2009, may fall 33 percent by year-end from 44.65 cents a pound on August 14. US exports plunged 20 percent in the first half and are heading for the first annual decline since 1990 after the H1N1 virus outbreak in April led to import restrictions in China and Russia. Tyson Foods Inc. idled slaughterhouses, and US hog farmers have not been profitable in a year.

Swine flu will contribute to an 11 percent drop in global pork trade this year, even after scientists said the meat is safe to eat, United Nations data show. Slumping exports, the global recession and improvements in breeding methods left US inventories in June at a record high level for the month.

"What do we do with all these hogs?" said David Kruse, a commodity trading adviser at CommStock Investments Inc. in Royal, Iowa. "The industry is just not structured to modify production in response to reduced demand. The industry is basically structured to go broke. It will produce hogs until it runs out of money."

After falling last week to the lowest price since November 2002, hog futures may average 30 cents to 32 cents a pound on the Chicago Mercantile Exchange in November because of unwanted supply, said Glenn Grimes, a livestock economist at the University of Missouri in Columbia who's followed the industry for more than 50 years.

Farmers are losing $30 to $35 on every pig they sell this month and may not make money until May, Mr. Grimes said. Producers have been unprofitable for 20 of the 22 months through July, and more than 5,000 of them may need to exit the business, he said.

Only then would the breeding herd shrink by the 10 percent needed to spark a turnaround, he said.

"Some producers have basically told us that they are going to liquidate, in some cases parts of their herds and in other cases maybe their entire herds," said Gary Machan, the vice-president of pork procurement at Springdale, Arkansas-based Tyson, which buys pigs from about 6,000 farms. "We expect that will continue here in the near term as well, because of the economic conditions they are experiencing."

Falling demand is creating a downward spiral as meatpackers cut slaughter rates, leaving animals stuck on farms where they gain more weight and produce more meat. On August 8, pigs were more than 10 pounds (4.5 kilograms) heavier on average than a year earlier, US Department of Agriculture data show.

The weight gains are the biggest year-over-year increase ever. Pork inventories were already 9.2 percent larger in June than a year earlier at 578.8 million pounds, USDA data show.

Consumers may lead a rebound by taking advantage of the lowest wholesale prices since January 2003 to switch from more expensive beef and chicken, said John Lawrence, a livestock economist at Iowa State University in Ames.

Retail ham prices are down 2.5 percent this year to $2.37 a pound in July, while chicken breasts rose 1.1 percent to $3.32 a pound and beef steak sold for $5.289 a pound, a decrease of 1.6 percent, Labour Department data showed on August 14.