Allan Bentley, USA Sales, Genesus Genetics.
Did Christmas come early for the agriculture/livestock community?
USMCA* is finally on its way to being passed and Phase 1 of the trade deal with China seems in the bag. China’s hog population is ½ what it was in August 2018. So why are cash hogs as low as they are? Why haven’t we seen futures react? We are killing 2.8 million hogs a week; packers are full and they will stay that way as long as they are making $50/ head.
Every year this time we are at the highest level of hog slaughter, historically it will drop soon. This year should be no different and cash hogs should move higher.
Tyson and JBS sent out letters that they will be 100% Ractopamine free. They know that China needs the pork and they do not want to be left out of playing in that game.
There is absolutely no way we are going to stay at these cash hog prices with coming lower slaughter numbers and the fact the world has lost 25% of the hogs! I can see the $50 per head packers are making passed quickly to the producer. As for futures and the lack of being able to move higher, I believe traders will have to see some action in the markets before believing.
The run up we had in futures last spring, as the whole industry was bullish due to the news of China losing half their herd and then nothing became of, is an example as to why traders will need to see the boats leaving with product before buying into it.
The politics in Washington also had as much to do with holding prices ridiculously undervalued for this past year. President Trump needed good news and the democrats fought as long as they could to keep him from getting a win. Personally, if I was a democrat, I would have given him USMCA a long time ago. Voters would have forgotten about it by the 2020 election. Egos in politics are huge and agriculture, especially the hog industry, have been caught up in the middle. Let’s hope this chapter is behind us and using agriculture as an end to a means is over.
I had a conversation with a good friend who is less then excited about the USMCA agreement as he wanted country of origin labeling included in the deal. I told him the meat industry needs to focus their energy on educating people on fake meat. This is a bigger issue and it will compete with our product if we do not separate fake meat from the real meat. Right now it is beef, but pork could be next. If anyone does not believe me, look at the dairy industry. I believe the “nut juice” is currently 14% of the milk industry.
*United States–Mexico–Canada Agreement
This post was written by Genesus