China’s hog crisis adds up to rising global pork prices, and hedge funds are along for the ride
- African swine fever has had a devastating impact on China’s sow breeding herd
- Weekly US commodity futures data shows money managers have flipped back to bullish from bearish on the outlook for pork prices
There are finally enough signs of an emerging pork catastrophe in China to propel prices and get funds to turn bullish again.
African swine fever, which is highly lethal and difficult to contain, was first reported in China last August. It’s taken time for the disaster to play out, but it’s arrived. Pork prices in the Asian nation have shot up, and the Chinese government said its sow breeding herd was down about 15 per cent. That decline is bigger than the entire herd of North America.
Earlier this month, China made its third-biggest weekly purchase of pork from the US ever, and on Thursday the pace of exports increased despite a massive tariff. The US Department of Agriculture expects total Chinese pork imports to jump 28 per cent.
“That flipped the psychology in this market,” Dan Norcini, an Idaho-based independent livestock futures trader, said of the purchase. “Finally people were waking up.”
Futures have skyrocketed, with the most-active June contract up 26 per cent in March to the highest since it started trading in late 2017.
Money managers have flipped back to bullish from bearish on hogs as long positions outnumbered short ones by 8,090, weekly US Commodity Futures Trading Commission data on futures and options show. Holdings had been net-short by 3,633 positions a week earlier.