News trade war
Pig surplus threatens US
US pork production is heading for a record. Bad news, because the trade war between the United States (US) and China is making sales a real challenge. Meanwhile, prices on the Chicago stock exchange continue to fall.
The newspaper 'The Washington Post' paints the picture of an American sector heading towards a production record. On top of that is the forecast of further growth in 2019. However, demand is under pressure due to the trade war, raising the risk that Americans will be left with a mountain of cheap meat.
Consumption is increasing
The United States Department of Agriculture (USDA) estimates that pork consumption will continue to grow. With a forecast of 53,3 US pounds per person, consumption is at its highest level since 1980. However, growing demand is not enough to compensate for the plus in supply. The contracts on the futures market are currently at a price equal to 2002.
It was the reason for the hedge funds to extend the price cuts, meaning the price has not yet bottomed out. The competition with cheap chicken and burgers partly explains the falling pig price† Not only is a lot of pork expected, but also a lot of beef and chicken.
Meat plug remains
The meat plug will not disappear soon either, because more factories opened their doors in 2018. This after the necessary processing was added in the last period. "As long as the price covers the variable costs, it is unlikely that fewer pigs will be slaughtered."
Due to the trade war, 40% of US meat production is affected by high import tariffs. These have been imposed by, among others, China and Mexico. The American pig federation is already preparing for major financial losses.
From win to big loss
The pig farmers started the year with the expectation of a decent yield for 2018 and 'break-even' for 2019, but are now well in the red. In response, the first parties are considering investing in South America or Europe in order to circumvent trade barriers.
Herman van den Pol
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