(Bloomberg) — U.S. meat markets had so far been shielded from the effects of a deadly pig disease wiping out Asian herds. That’s starting to change.
As pork supplies plummet in China, the world’s top consumer is desperate for meat and is ramping up imports. As a result, it’s becoming harder to set longer-term protein contracts amid concerns over market volatility and changing trade flows, according to Jayson Penn, chief executive officer of Pilgrim’s Pride Corp., the No. 2 U.S. chicken producer.
“The contracting season is moving somewhat slower this year” for chicken, Penn said on a conference call with analysts following the release of third-quarter earnings. While major fast food restaurant chains are looking for beef contracts, “there are not many sellers willing to forward price,” he said.
American markets have so far been protected from the impact from African swine fever, which kills most infected pigs in 10 days. That’s largely due to trade barriers that were either in place — the case for chicken — or imposed as retaliation to President Donald Trump’s trade war with China. But expectations of rising prices are now affecting the U.S. market.
Burgers
Pilgrim’s Pride also cited a slowdown in Australian beef trim shipments to the U.S. that’s affecting the burger market. That’s just one of the countries boosting sales to China to take advantage of rising demand. The executives also cited rising prices for chicken-leg quarters in the past week after China said it would end a ban on American imports as part of a partial trade deal with the U.S. The cut is processed for domestic consumption, but it’s also a hot item for export.
Meat exports from the U.S. have lagged behind levels many in the market expected following the swine fever scourge. Archer-Daniels-Midland Co., one of the world’s largest agricultural commodity traders, said protein producers have been slow to boost production outside China. The company now only expects tailwinds from the disease next year, CEO Juan Luciano said.
“We thought acceleration of growth production outside China was going to be faster,” he said on an earnings call with analysts.
On the Chicago Mercantile Exchange, hog futures for December settlement fell 9.1% this month, the biggest drop among major agricultural commodities. The slump underscores the challenges for U.S. farmers who have increased production. China has bought U.S. pork in stops and starts, contributing to elevated volatility in hog futures.
Pilgrim’s Pride said it’s “cautiously optimistic” that chicken prices will be higher in the next 30 to 60 days. If China lifts a ban on U.S. poultry, American shipments to the Asian nation may top 2014 levels, said Penn, whose company shipped 200 million pounds (about 90,700 metric tons) to China five years ago.
While chicken feet are the major cut exported to China, demand for leg quarters and breasts may also gain because of depressed prices, he said.
Declines in China’s pig population have peaked and surging prices are giving an incentive for producers to “think about how to rebuild the herd,” ADM’s Luciano said. About a third of the Chinese producers affected by the disease have switched to poultry, while many are looking to increase animal weights before slaughter, he said.
(Updates with comments from ADM CEO starting in sixth paragraph.)
–With assistance from Michael Hirtzer.
To contact the reporters on this story: Lydia Mulvany in Chicago at lmulvany2@bloomberg.net;Isis Almeida in Chicago at ialmeida3@bloomberg.net
To contact the editors responsible for this story: Millie Munshi at mmunshi@bloomberg.net, Patrick McKiernan
For more articles like this, please visit us at bloomberg.com
©2019 Bloomberg L.P.
https://finance.yahoo.com/news/pig-plague-starts-rippling-american-192503598.html
THE “WORLD MARKET WILL NOW ADDRESS HOW MUCH AMERICANS PAY FOR FOOD. JUST LIKE IT HAS DONE CONCERNING FUEL COSTS………..THE “UNIFORM COMMERCIAL CODE” ON DAMN STEROIDS.
WORLDWIDE……………