Pull your hat down tight — it could be a wild ride

Have we ever had so many balls in the air? I suppose so, but I can’t remember them being quite as explosive as some of these seem to be.

 

Steve Meyer, National Hog Farmer

Dec 03, 2018

 

As the calendar winds down on 2018, we are not at a loss for things to consider in pork and hog markets. There is still a huge amount of risk at both ends of this market. The positive side is predicated almost completely on China. Its African swine fever situation and the ongoing but apparently paused trade war with the United States will be key to rallies in the U.S. market. The negative side would be predicated on ASF finding its way to the United States.

 

Those are the extremes, but there is a huge set of intermediate results that could still move the market significantly. Here are my thoughts about key factors in the next few months.

 

ASF — China

 

This is the single largest factor in world pork markets. The Chinese situation seems to get worse each week even though we don’t know many details at all. USDA’s publication of data showing small actual pork shipments last week and slightly larger booked pork shipments for next year was ballyhooed by many as the starting gun for a new export race. We think it was positive but are not ready to say things are changing yet. Our reticence is primarily due to the weekly data series not fitting well at all with the monthly (and more dependable) monthly data series from the Commerce Department and Foreign Ag Service.

 

This weekend’s announcement that the United States will not be escalating tariffs on Chinese goods puts a more positive spin on the situation and some are reading China’s willingness to resume importing U.S. agricultural goods as a clear sign that they need pork. That could be, but we probably need to wait for details.

 

ASF in Sichuan and the wild boar population in China are both quite foreboding developments. We still expect the big needs for pork to begin next summer when today’s breeding animal losses translate into missing market pigs.

 

ASF — European Union

 

We haven’t heard much lately out of Europe but, given ASF’s history, stopping it in the presence of a large wild boar population seems unlikely. The question is whether it gets into domestic pigs and whether the EU, with its high level of control and organization, can stamp it out if it does. Reports indicate that animal health officials have been very aggressive in removing wild boars in the area of Belgium where the disease was found. The wild card here is how the EU handles pigs and pork movements if Germany breaks.

 

U.S. hog supplies — Not as big as expected ...

 

Strong economy — But storm clouds are rising ...

 

Big crops and great condition in South America ...

 

Optimistic futures versus fundamentals ... 

 

more, including charts

https://www.nationalhogfarmer.com/marketing/pull-your-hat-down-tight-it-could-be-wild-ride