Last week U.S. hog futures jumped almost 10₵ lb. A phenomenal increase triggered by the realization that we saw coming – China will need pork. ASF has devastated China’s pork supply.
It was announced last week China bought 23,900 metric tonnes of U.S. pork, despite tariffs at near 70%. The African Swine Fever (ASF) Black Swan Event we have been predicting for weeks is now being recognised by the market. “Black Swan Event is an event in Human History that was unprecedented and unexpected at the point it occurred”.
This past week we were at VIV Asia in Bangkok Thailand. Chinese industry people speculate that China’s production could be down 20-50% by the time ASF gets under somewhat control. 20% down is equal to U.S. production, 50% is incomprehensible.
This week we were asked if summer U.S. Lean Hogs could reach $1.20 lb. Our answer; we wouldn’t be surprised. PED was nothing compared to this.
This week in China the market hogs jumped from 13 to 16 rmb/kilogram live weight or near $50 per head (88₵ to $1.08 lb.), 20₵ times 250 lbs. = $50. Expectation is China hog prices will reach 20 – 23 rmb/kilogram – $1.30 – $1.60 U.S. /lb.
We expect to see all global pig markets to reach record levels at some point this cycle.
The Market jump we are seeing in U.S. lean hog futures isn’t anytime too soon. The industry has been losing money for too long. Cash prices are still below breakeven but daily price increases are getting all too breakeven quickly.
Last Friday the U.S. calculation for the prices you could pay at market for a 45 lb. feeder pig for July hog market delivery was $84.50 U.S., a reflection of the profitability.
In China 15 kg (34 lb.) feeder pigs last week were 750 rmb ($111 U.S.). While 7 kg pigs are 550 rmb ($82 U.S.). In the meantime publicly traded swine companies have seen their shares move 5 times higher than they were in August. All in speculation of the massive profits expected in the Chinese hog markets.
To show how bizarre this whole thing is getting, U.S. customs seized 1 million lbs (454 metric tonnes) of pork trying to be smuggled from China at the port in New Jersey. With the current hog price in China double the U.S., we speculate that this Pork will be highly likely to be ASF positive. Border diligence must be prevalent like never before.
This week we’ll be in Spain at the Figan Swine exhibition in Zaragoza Spain: we will report our observations on the Spanish market in next weeks Commentary.