In recent articles over the course of 2019 we have highlighted the risk posed by the outbreak of African Swine Fever. The disease continues to spread unabated but if you looked at recent price action in CME Hog Futures you may be led to think otherwise. Global pork prices have eased as we expected in line with intelligence that telegraphed a destocking of Chinese cold storage pork inventory.

The Chinese government had made it clear that mandatory testing of cold storage was on its way by July 1st, rendering any infected meat worthless. You can understand the motivation of meat owners to clear inventories. Our real concern is and has always been the second half of 2019. Recent data released from Shandong Province, Chinas largest feed producer, shows pig feed production down an incredible 27.5% year on year. Of even more concern is sow feed which is down 39% year on year and nursery feed down 46%. So, the commercial pipeline for restoring Chinas hog population is running at 50-60%? Moving to the US, the market having expected higher and higher pork prices have been disappointed by lack of export demand follow through.

We believe the market has misread the signals from China. Delve deep into the specifics of African Swine Fever and the emptying pipeline of Chinese breeding stock and you will understand that global protein supply is moving into a persistent deficit not seen before in this generation. Prices will move higher; no protein will be spared. Onto the discussion of US pork exports. Where is the demand? The answer, it’s there and its imminent. Realignment of slaughter houses to export whole carcass cuts is happening. Physical supply chains are filling, and Chinese interests are engaged with a large US export program commencing in the coming weeks.

As this export demand emerges we expect pork prices to sizzle once again, watch this space.