Global food prices next year face a triple threat from extreme weather, the US-China trade war and livestock disease, according to a Rabobank study published by the Financial Times.
The Times article said the bank’s annual outlook for the new year said geopolitical tension, El Nino (a warming of equatorial Pacific Ocean waters) and the spread of African Swine Fever risked harming food prices.
EL NINO THREAT
Some US meteorologists have given 80% odds of El Nino forming by the end of winter in the northern hemisphere, and Rabobank expected the event to drive uncertainty across commodity markets. In general, the weather phenomenon brings dryness to southeast Asia, Australia and Brazil while dumping excess rains on Argentina.
El Nino also has been credited for bringing more moisture to the Southern Plains and parts of the US Midwest.
However, those weather events can’t be relied upon, earth scientists say. Those cited events are only generalities and tendencies, keeping uncertainty in the markets, and traders hate uncertainty.
US-CHINA TRADE WAR CONTINUES
The US-China trade war has been cited for cutting soybean exports to China and for unsettling the business climate of the two countries. Many expect negotiations to mend many of the fences, but so far, all they have is the hope that government leaders will bargain in good faith.
If the US-China trade war continues, Rabobank was cited saying US farmers will feel the financial pain, with soybean growers the most affected. Further or continued purchasing cuts from China could keep US stocks growing and pressure prices.
The Rabobank study noted that China is the world’s largest buyer of soybeans, importing 60% of the available crop. This year, it has turned to Brazil for its supplies, leaving US farmers holding the bag.
The US has sold soybeans to Brazil that many think are replacement stocks for inventory sold to China, but there is no confirmation of this.
ASF EFFECT STILL UNCERTAIN
The Financial Times article said Rabobank expected the spread of ASF to continue having an effect on pork production globally. It would prove especially harmful to China where it has blown up this year across a wide area of the country.
China’s pork output will fall, leading to higher prices and an increase in import needs, the article said.
However, that production shortfall may be delayed. Various reports say Chinese farmers are selling their herds before the disease can show up on their property and force them to cull the entire herd or watch the whole herd die from ASF. Once this surge in production is done, at least one analyst thinks shortages are more likely.
Meanwhile, Europe has an oversupply of pork, the article said, which also is vulnerable to disease.
CATTLE, BEEF RECAP
Cash cattle traded last Wednesday at $110 to $112 per cwt on a live basis, down $3 to $5 from the previous week, while dressed-basis trading was reported at $175 to $176 per cwt, down $3 to $4.
Then cash cattle traded Friday at mostly $114 per cwt on a live basis to $114.50, steady to down $0.50 from the previous week. Dressed-basis trades were reported Friday at $178 per cwt, steady to down $2.
The USDA choice cutout Tuesday was up $0.70 per cwt at $214.09, while select was down $0.14 at $198.43. The choice/select spread widened to $15.66 from $14.82 with 118 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Monday, was $147.40 per cwt, up $0.31. This compares with Tuesday’s Jan settlement of $146.87, down $0.40.