Reading too much between the lines?
While China is still a bit stingy with any details, the Ag Ministry did report another confirmed case of African Swine Fever in the Xinjiang region. At least that I have seen, numbers were not released but they did note that the herd was culled. It is always dangerous to assume anything, but there do not appear to be any reports that would indicate the current “issue” is anywhere on par with the outbreak in 2018, but the performance in the hog markets would seem to suggest that the problem could be a smidge bigger than we have been led to believe. As with many commodities, and many markets in general, the recovery in hogs from the Covid-panic lows last spring has been nothing short of remarkable. The initial move just brought June futures back into the 70 to 85-cent range where this market has spent the better part of the past five years, but now, over the past three months, we have shifted into another gear and have now pushed through the peak witnessed at the last major ASF outbreak.
Now, do keep in mind that the prospects for a global economic recovery and the fact that on the last quarterly hog and pigs report, inventories and breeding numbers were down 1% and 3% respectively, but that would not seem to justify the 25% advance we have witnessed in hog futures just in the past three months. We need to keep a close watch on how this continues to unfold in China as it will have an impact not only the future prospect of the hog markets, but of course grain/soy as well.
The overall news is rather sparse this morning. We drew a blank on the export sales board again, but have the weekly sales to look forward to tomorrow. In the macros, we find energies higher after a big washout yesterday, metals firm, financial instruments flat, equities higher, and the dollar reaching into higher highs for the calendar year once again.