The Illinois Farm Policy News this week pulled together some news stories that said China’s hog futures had fallen amid increased slaughter rates as the country recovers from its African Swine Fever outbreak.
“Financial Times writers Hudson Lockett and Thomas Hale reported this week that, ‘Hog futures in China have fallen to record lows as mass slaughtering of pigs prompts fears that the world’s second-biggest economy faces a deluge of pork.
“‘Rising concerns that the local pork market is becoming inundated have led to a more than 30% fall in Dalian-traded hog futures, which allow investors to bet on the future direction of prices, since they were launched in January.
“’The situation contrasts with that in the world’s biggest producer, consumer and importer of pork over much of the past two years, when outbreaks of African Swine Fever resulted in price surges on fears of supply shortfalls.”’
The FT writers said, “Prices have been hit as authorities have encouraged farmers to raise more pigs and replenish the country’s pork reserves following outbreaks of ASF.”
FEARS UPON FEARS
Apparently, the supply situation has been exacerbated by farmers bringing forward plans to cull their herds to get ahead of even lower prices, the FT writers said. Oversupply fears also were stoked by farmers fattening their sows prior to slaughter.
And Reuters writer Dominique Patton reported that “China’s state economic planning agency urged pig farmers on Wednesday to keep pig production capacity at a reasonable level after a closely watched indicator of production costs last week fell far below the point at which most farmers make money.” The average hog-to-grain price ratio fell below 6:1 last week, according to the National Development and Reform Commission, which also said it had issued a level-3 warning or an excessive drop in live hog prices.
The Reuters story said live hog prices had plunged by 60% this year, catching the market by surprise and coming before the herd had recovered fully from the ASF herd culls.
US CORN DEMAND AND EXPORTS UP
Meanwhile, the USDA reported this week that US corn export prospects for the 2020-21 crop year were boosted while Brazil’s were downgraded. As Brazil’s corn exports decline, foreign demand for US corn likely will rise.
More specifically, the USDA said 2020-21 corn exports were estimated at 2.850 billion bushels, a 75-million-bushel increase from its estimate just a month earlier. And much of the latest increases in corn exports have gone to China.
For the 2021-22 crop year, corn exports were projected to be 2.450 billion bushels amid projections for increased world supplies and more competition for US markets.
CATTLE, BEEF RECAP
Fed cattle traded this week at $120 to $124 per cwt on a live basis, up $1 from last week. Dressed-basis trading was at $190 to $195, up $1 to $2.
The USDA choice cutout Wednesday was down $2.92 per cwt at $326.25, while select was off $2.72 at $287.24. The choice/select spread narrowed to $39.01 from $39.21 with 99 loads of fabricated product and 19 loads of trimmings and grinds sold into the spot market.
The USDA reported Thursday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.00 to $1.07 a bushel over the Jul futures and for southwest Kansas were unchanged at $0.70 over Jul, which settled at $6.33 a bushel, down $0.40.
The CME Feeder Cattle Index for the seven days ended Wednesday was $141.28 per cwt up $0.93. This compares with Thursday’s Aug contract settlement of $157.40 per cwt, down $0.30.