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US hog market languishes amid coronavirus outbreak worries

The US hog futures market continues to trade choppy and sideways at lower levels, as the pork market bulls remain very timid amid the ongoing coronavirus scare that continues to upset the global marketplace.

9 March 2020, at 2:17pm

Do not look for this situation to stabilise anytime soon. Importantly, the benchmark US 10-year Treasury note yield earlier this week fell below 1 percent to a record low, and remains below that level. This has prompted keen concern among long-term market watchers that a US and/or global economic recession looms, including the prospect of debilitating consumer and commercial price deflation. This is bearish for stocks and most commodities, including cattle and pigs. An examination of a chart of the Goldman Sachs Commodity index paints a dour picture for the prospects for the raw commodity sector, including the agriculture markets.

The next week’s likely high-low price trading ranges

April lean hog futures: $61.00 to $68.25, and with a sideways, choppy bias.

May soybean meal futures: $300.00 to $315.00, and with an upside bias.

May soybean futures: $8.80 to $9.15 and with a slight upside bias.

May corn futures: $3.75 to $3.88, and an upside bias.

Pig traders see stepped-up China purchases of US pork

The weekly USDA export sales report issued Thursday morning showed the following, based on reports from exporters for the period February 21-27, 2020.

Net US sales of 33,700 MT reported for 2020 were down 13 percent from the previous week, but up 12 percent from the prior 4-week average. Increases were primarily for Mexico (17,500 MT), China (4,500 MT), Japan (3,800 MT), South Korea (3,300 MT), and Canada (1,400 MT). Exports of 43,500MT were up 2 percent from the previous week and from the prior 4-week average. The destinations were primarily to China (17,500 MT), Mexico (10,800 MT), Japan (4,700 MT), South Korea (3,300 MT), and Canada (2,600 MT). March 5, 2020.

Highlights of US Agriculture Secretary Sonny Perdue’s testimony to the US Congress Wednesday

USDA Secretary Perdue said China likely will fulfil Phase 1 purchase commitments, even with concerns about the impact coronavirus may have on China meeting those obligations.

“None of us obviously know what the impact is going to be,” he said of coronavirus, but added that market fundamentals remain strong thanks to robust consumer demand and the new trade agreement. Despite uncertainty over the virus’ impact, the signals from China are that they “want to fulfil” their purchase commitments under the Phase 1 deal, Perdue said. He predicted China would begin to increase purchases from the US in late spring and summer, as the market shifts from South American producers.

One congressman asked Perdue if USDA is taking any action regarding the buildup of meat in cold storage due to shipping problems related to coronavirus.

“We try to be aware with our eyes on the ground there, we see some easing of that, more people are getting back to work in the ports” in China, Perdue responded. Shipping backlogs appear to be easing as more products continue to be unloaded.

“Hopefully we're over the worst of that and can move forward,” he said.

Regarding possible US trade deals with the EU and UK, Perdue said the EU’s position on issues like biotechnology and issues like perceptions around chlorine-washed chicken, which “we really don’t do at all” continue to be a sticking point. On the UK, Perdue was more hopeful.

“I think the future is better for the UK We're looking forward to having reciprocal trade with the UK once they're out of the EU,” he said, adding that he thinks reaching a deal with the UK may help facilitate better relationships with the EU in trade negotiations.

Prices still in downtrend and bears have overall technical advantage. However, more gains in very near term would suggest that market bottom is in place
Prices still in downtrend and bears have overall technical advantage. However, more gains in very near term would suggest that market bottom is in place

© Jim Wyckoff

Prices move into lower boundaries of the trading range of past few years, and now starting to rebound, suggesting more upside price action in the coming months
Prices move into lower boundaries of the trading range of past few years, and now starting to rebound, suggesting more upside price action in the coming months

© Jim Wyckoff