Pork Commentary

 

Jim Long President -CEO Genesus Inc.

August 6th, 2019

 

Hog Market – Roller Coaster

 

The U.S. hog market continued a roller coaster year with a dramatic decline in lean hog futures last week. It’s been a chaotic year with dramatic ups and downs. It’s stressful. It’s baffling and not necessarily logical the chaos that has been happening. For example, August Chicago lean hog futures closed Friday at 76.27 but 53-54% National Price on August 1st was 83.69˘ lb. Of note a year ago 53-54% lean hog were 67.21˘ lb. ($30 per head lower) To us what pork cut-outs and cash prices reflect the market place of supply-demand. Lean Hog Futures not so much. As my late friend Doug Maus used to say “Chicago is Las Vegas with no rules.”  USDA pork cut-outs closed Friday at $86.64.

 

The lean hog futures got hit last week like most of the U.S. stock market by the announcement of new tariffs on China that could commence September 1st. In the hog sector the ability to send pork to China is the big question hanging over the market. The U.S. is already facing almost 70% tariff on pork.

 

Rabobank

 

Last week Rabobank the world’s largest agricultural lender released a report estimating that already 40% of China’s hog herd has been lost due to ASF related issues.

 

·         Rabobank estimates China herd could be half by end of 2019

·         Rabobank speculates China herd may take 5 years to recover

 

Rabobank numbers are in line with what we have been reporting. China’s hog and pork production will continue to fall over the next 12 months. China’s hog prices will continue to increase. The great sucking sound we will hear is the pork and other meats being sent to China from around the world. The real question is how much from USA-Canada? Market cost and access matters!

 

Other Observations

 

·         Much talk in U.S. about soybean to China. How many soybeans does China need if they have 200-300 million fewer hogs to feed?

 

·         Corn same thing 200-300 million fewer China hogs certainly will cut corn needs.

 

·         At NPIC meeting a speaker spoke about corn ethanol usage flattening. That the push to electric and hybrid vehicles will hit corn ethanol demand hard. Made us think what is corn ethanol’s future? If not in vehicles where? Could be game changes over the next decade.

 

·         Another speaker at NPIC also pointed out getting ASF in North America not a given. Foot and Mouth and Classical Swine Fever have been around a long time and been kept out.

 

Beyond Reason

 

Richard Berman had an excellent article in the Washington Times last week on Beyond Meat – i.e. Beyond Burger contains almost twice as much fat and 50 percent less protein. It’s also higher in sodium and calories: https://www.washingtontimes.com/news/2019/jul/30/what-beyond-meat-investors-should-know/

 

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