Unable To Save Its Own Bacon, China Fires Rally In U.S. Hogs
Investing.com | Mar 20, 2019 04:44AM ET
Agricultural China’s worst fears have come true—no, it’s not a collapse in trade talks with the U.S. or new Trump tariffs on farm products, but rather that the world’s biggest pig farming nation has to count on America for its bacon.
The dreaded African Swine Fever (ASF) that has been raging through China's pig farms for months is obliterating China’s hog herd rapidly, resulting in panic buying by Chinese importers of pork from any approved source, including Brazil, and, particularly, the United States.
Data shows that 50% of U.S. pork exports last week went to China as ASF raged in full force across China’s pig population.
According to the U.S. Department of Agriculture, China bought 23,800 metric tons of U.S. pork in the week ending March 7—the most since late April 2017 and the third biggest jump in data going back to 2013.
h3 Jump In Exports Propels Hogs Futures To Agricultural Commodities Top Spot/h3The market impact from that? A 25% gain for U.S. lean hogs futures in March alone from three straight weeks of rally on the Chicago Mercantile Exchange. After a weak first two months, lean hogs are up 16% year-to-date, making them by far the best agricultural commodity performer of 2019.
Shawn Hackett, founder of the Hackett Financial Advisors agricultural markets consultancy in Boca Raton, Florida, said the blistering market action was affirmation of both chart and physical demand strength for lean hogs.
Added Hackett:
“ASF is one of the greatest non-weather-related fundamental shocks in agriculture that we have ever seen. Volatility is going to be on the rise and there will be set backs along the way, but this is a major bull trend for 2019 that will not being going away anytime soon.”
“We feel by the fourth quarter, prices can retest the highs that were set in the 2014-bubble top.”
Lean hog futures hit record highs of $1.3380 per pound in the summer of 2014, after another hog-killing virus called porcine epidemic diarrhea, or PED, hit the U.S., killing over 8 million pigs.
h3 Prices Could Rally Another 6% In The Near Term/h3In Monday’s trade, CME’s front-month lean hogs contract, April, got to an eight-month high of 71.80 cents per pound.
Technical analysts on Investing.com rate April hogs a “Strong Buy”, putting top-end resistance for the contract at 75.93 cents—meaning it could rally another 6% in the near-term before a correction.
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Said Hackett:
“This would be an ideal place for this market to reach a short-term top, and have some type of corrective consolidation phase, before the final run back up to the 2014 highs. Time will tell if normal rules apply or if this is just one big panic runaway spike trade.”
Rich Nelson, chief strategist at Allendale, concurred, telling Bloomberg News that the potential impact of ASF on hog supply meant “we can make a bullish case or a crazy wild bullish case”
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