In the last 3 weeks, we have lost $12 of the futures prices of pork.
Like it or not, hogs are on the front lines of the trade war with China. Soybeans are at the left flank and hogs have the right flank of this battle. The issue is, behind enemy lines,China’s hog numbers are being decimated by ASF. This market set back is just that, a set back.
I read somewhere that the loss in China from African Swine Fever represents 5% of the global supply of pork. The road to higher prices is not a simple straight line. It is healthy for the market to pull back, take profits, and then move higher. If 5% of the global supply is gone or in the process of being eliminated, this market should not continue to move lower.
Having said that, the packers are not making any money either. I am sure no one feels sorry for them but like it or not those packers are a valuable part of the Pork Industry. If they are not making money they have no incentive to really be running at 100%. I would pay close attention to cut out values as to price direction in both live hogs and the futures.
It was also stated by Tyson lately that African Swine Fever poses a risk of entering the U.S. That statement sure did not help markets this week. Once the futures absorb this news markets will stabilize. President Trump needs the farmers vote and China needs our pork. The trade issues with China will get resolved and hogs will be good property to own. As far as the statement Tyson made about the increased risks ASF poses getting to North America, we will have to wait and see.
I have had Vets tell me it will be a regional issue and we should be able to contain it. On the other hand, I had a vet tell me ASF symptoms mimic other diseases and that if it somehow got in a herd, it could be 2 weeks before they test for it. By the time they get results back from Plum Island with confirmation it would then be hard to contain.
Ending on a positive note, I think China, sooner than later, will have to start buying our pork and markets will see an upswing.