By Harry Siemens – Tyler Fulton, the Director of Risk Management with h@ms Marketing Services said hog markets remain very dynamic and unpredictable.
Large hog supplies and tariffs on U.S. pork drove down live hog prices earlier in the season than usual.
Fulton said while U.S. cash prices rebounded by about 10 percent over the past two weeks, the past three months, the markets have cut the price in half.
“Hog supply and pork production is probably the primary factor that drove prices lower,” he said. “There’s just a lot more pork out there than what we’ve seen in years and when there are a heavy supply and constraints to the demand side, coming largely in the form of tariffs on U.S. pork exports, that drove the market to its lowest levels in years. It’s those combinations of things.”
Fulton thinks the cash market started to respond when the pork buyers became quite aware that there wasn’t any great potential of a severe upside to the market so they just simply started delaying their purchases as much as they could and that perpetuated the problem of moving the price lower.
“When buyers step away that’s the effect that it has.”
Fulton said there are several factors at play that can move the market in a hurry, hurricanes, and the development of African Swine Fever in China.
“I recommend taking opportunities to hedge in the near term but holding off hedging decisions further out.”
Brett Stuart, the President of Global AgriTrends, said despite the current disruption in the global trade of U.S. pork the long-term outlook remains optimistic.
In retaliation for import duties imposed by the Trump administration, China raised its tariffs on U.S. pork to 62 percent and Mexico has imposed 20 percent duties on U.S. ham.
“Trump, Trade and Global Pork” will be a discussion as part of Saskatchewan Pork Industry Symposium 2018 November 14 and 15 in Saskatoon.
Stuart acknowledged the election of Donald Trump had changed U.S. global trade patterns, at least in the short term.
“Today our pork exports are positive for the year to date period, but our domestic prices are low. The spot cash hog price three weeks ago hit a 15 year low in the U.S. Our producers in the U.S. are losing money today,” he said. “It’s easy just to throw stones at the trade agenda and say that’s what’s costing us money and that is probably costing us a little bit of money but the other piece, big supplies in the U.S.”
Stuart said U.S. pork production grew well over two percent last year, and it’s up three to three and a half percent this year. On a per capita basis, the amount of pork produced for every man, woman and child in America, these numbers are approaching 15-year highs.
“We’ve built new barns, new plants so supplies are abundant in the U.S. and that’s weighing on the market, too,” he said. “I don’t know if we’ll see any fundamental structural change in U.S. pork production that we can link to the trade agenda. We see some margin pressure but, again, it’s a function of exports as well as the supplies here at home. Still, the exports are a favourable year to date.
Stuart remains optimistic long term.
“These political issues are temporary but North American pork remains among the most competitively priced in the world and the world population is growing.”