Buckle your seatbelts and get ready for a wild ride in meat and grain markets in coming months, analysts told the Global Hog Industry Virtual Conference.
The meat market may not have yet realized how big the African swine fever impact will be in China, and the United States corn crop is treading deeper into trouble.
“As long as the U.S. remains disease-free, pork producers can expect an acceleration in pork prices,” said Dennis Smith of Archer Financial Services.
Why it matters: Pork shortages in China and lower corn plantings in the U.S. align to create potential for a chaotic year in markets.
For livestock feeders, the profitability will be affected by the fate of the U.S. corn crop, which is millions of acres short of expectations due to too-wet soils. That could cause feed costs to surge. For grain growers, the burdensome stocks of recent years might begin to lighten and offer relief.
“We’ve had several years of above-trendline yields. That’s going to change this year,” said Smith.
The online conference was organized by National Hog Farmer to fill in the void created by the absence of the World Pork Expo, which was cancelled because of fears of foreign visitors bringing ASF to North America.
Smith and Jim Long of Canadian hog breeding company Genesus provided a bullish price outlook for North American pork prices.
Long said he had just returned from a trip to visit Chinese customers, and he was “shocked” by their herd losses. He expected to see the extent of losses at about 30 per cent in line with most estimates, but he said “it’s closer to 50 per cent.”
Smith said he doesn’t believe the coming shortage of pork in China has been fully baked into futures prices.
“The futures market is still not totally aware of what’s about to hit.
“I think there will be an explosion in hog prices.”
Slaughter hog values should remain good too, Smith said, because shackle space is not an issue.
Long said China will need imports.
“We’ll find out if the rest of the world has enough food to feed China,” said Long.
China’s small-scale hog producers are likely to be pushed out of the industry if China has the same reaction to ASF that Russia had when its ASF outbreaks began in 2007. Small producers were allowed to fail and state funding was used to shore up major, multi-site producers, who were better designed to weather crises like ASF.
“The smaller operations went out of business.”
Smith and Long both said North America has a good chance of managing an ASF outbreak in a less disruptive manner than has been the situation in countries like China and Russia.
Smith said predicting where the corn crop and corn prices go from here is a guessing game.
“We’ve never experienced a year like this,” said Smith.
“Not this late…. Not this consistent. Not this broad-based throughout the corn belt.”
Anybody needing to feed livestock next winter needs to be thinking about price and availability of feed.
“This has been a surprise. Nobody saw this coming,” said Smith.