CME: Just How Important are Import Bans?
US - CME's Daily Livestock Report for 28 April 2009.To get a feel for what US pork producers and packers are going
through, imagine that someone with the same name as you robbed
the local bank and, upon his/her apprehension, your local newspaper
included YOUR picture in the front page, above-the-fold story. A definite
sinking feeling that makes you want to scream and cry at the same time,
huh? That is about what the pork people have been through with swine flu/
North American influenza/Influenza A (H1N1) over the past few days.
That last moniker (Influenza A (H1N1)) is the latest name for the
virus that has now been identified in people around the globe but not in a
single pig that anyone knows of. In fact, no one knows yet if pigs will even
contract the virus — though those experiments are no doubt ongoing.
It does not appear, though, that the press is picking up on the nonswine
names to any great degree, so the industry is still fighting to get the
message out that the virus is not transmitted through pork. Secretary of Agriculture
Tom Vilsack finally made that statement today. No one knows for
sure whether US consumers have reacted negatively but it is very likely.
Both futures and cash markets have moved sharply lower the past two days.
Nearby May Lean Hog futures were down $2.75 today after falling the $3.00
limit yesterday. June and July were down $2.35 and $1.78 today after limitdown
moves yesterday as well. The weighted average price of hogs sold
through negotiated trades in Iowa-Minnesota lost a combined $2.83/cwt the
past two days. Assuming carcasses equal in weight to last week’s estimated
barrows and gilts average (201 lbs.), and that the $2.83/cwt decline applies to
all of the 826,000 head slaughtered this week, the price drop has already cost
hog producers $4.8 million — or more, since a price rally has been expected.
Just how important are the import bans announced by our foreign
customers? Not unimportant but none of them are as important as
Mexico — which has not banned imports but where the most damage to our
export demand may occur due to the name connection between pigs and flu.
The table at left shows pork and pork variety meat exports to Mexico, Russia
and China/Hong Kong through February. The last two countries are the most
notable ones which have blocked imports from some states. Note that Mexico
is MUCH, MUCH more important in about every way — volume of pork
and pork variety meats, value of both classes of products, year-on-year
growth. China/Hong Kong is an important factor in the pork variety meat
market but readers should realize that over 75 per cent of the volume and value of
pork variety meats going to China/Hong Kong have gone through Hong Kong
and Hong Kong has NOT announced any ban on US pork products. Do you
think product might still find its way to China through Hong Kong much as
product from pigs fed ractopamine did last year? We think it is very, very
likely. Russia is a growing market for US beef variety meats but represents
only 7 per cent of the volume and 4.3 per cent of the value of ‘09 YTD shipments.
We know that “facts“ aren’t always what drives markets and that
US consumer demand may indeed suffer. But the pressure on meat markets
has every earmark of a panic based on emotion and psychology. An
understandable panic, perhaps, but a panic nonetheless. We wouldn’t call
the import bans “panics“, though. They are simply clear-headed decisions
with no basis of fact — and the countries make them are no surprise.
