North American hog markets wracked by coronavirus


By Marlo Glass – MarketsFarm, GFM Network News

via Canadian Canadian Cattlemen - February 11, 2020


MarketsFarm — Besides shutting down entire cities and killing more than 1,000 people, China’s novel coronavirus outbreak has wreaked havoc on North America’s hog futures.


“It’s a dubious relationship, but it is impacting markets,” said Tyler Fulton, risk management director for Hams Marketing Services in Winnipeg.


Lean hog futures moved “in concert with drops in the financial markets” a few weeks ago, when concerns of the coronavirus began dominating headlines.


“That wasn’t a coincidence,” said Fulton, noting concerns of the virus triggering a recession in China resulted in two limit-testing moves in consecutive trading sessions.


“Practically, it’s not rational,” he said. “But sometimes futures markets don’t care that much about practicality.”


North America’s hog futures market had been largely driven by expectations of large demand from China, after African swine fever wiped out a large swath of that country’s pork supply in 2019.


February lean hog contracts are nearing expiration, but trading around US$56 per hundredweight, which is “really very weak.”


The next contract is about US$65 per hundredweight, which is slightly stronger but still only about US$4 above contract lows.


“For the last several months, a lot of analysts have been anticipating some support coming in from the Chinese marketplace, especially closer to the Chinese Lunar New Year,” Fulton said. “But that demand never showed up.”


But while nearby contracts are hovering around lows, Fulton noted there is optimism further out.


“The market is projecting some type of recovery and resolution to the issue,” he said, citing the “extraordinary measures” China has undertaken to quarantine large cities impacted by the coronavirus...