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Jim Long Pork Commentary: USA-China have agreed to a “phase one” trade agreement

Last week we wrote about Hope being a pre-requisite to being a swine producer. Hope got a boost last Friday when it was announced that USA-China have agreed to a “phase one” trade agreement.

16 October 2019, at 5:00pm

This phase is supposedly to include $50 billion in agriculture purchases by China. Supposedly 30 million metric tonnes of soybeans and an unspecified amount of pork. In return the US will not increase a planned tariff increase scheduled for October 15.

It appears to be less than clear if China, as part of the agreement, is dropping or decreasing the tariffs of close to 70 percent on US pork.

Let’s assume they start taking offal and other cuts, the key is removing pork from the US domestic market. With hogs at $2.11 US lb in China, US pork can be over $1.00 lb. and still pay a 70 percent tariff. The point is, flowing pork to China at any significant level can put 10₵ lb. on US hogs in a very short time. This is good news for US swine producers.

China could use some pork. Last week China’s hog price jumped to 33.56 rmb a kg. That’s $2.11 US liveweight. A 260 lb. hog is bringing $560 US Doesn’t take an ag-economist to figure out that the price is a true reflection of demand out-stepping a short supply.

With ASF still eliminating pigs in China there is little relief in sight for Chinese consumers without large scale imports of pork and other meats.

Another reflection of supply-demand in China is early wean pig price. Last week it reached 72.22 rmb. Or just over $100 US each. In February this year they were $25 US.

The USDA confirmed last week record large sales of pork to China including 18,810 tonnes for shipment this year and 123,362 tonnes for shipment in 2020. Our farmer arithmetic tells us the total is equal to about 1.5 million market hogs in carcass equivalent.

We expect that as the new trade commitment moves forward significant pork will be exported. All good news for US pork producers and indirectly Canada’s as the higher US hog price will push Canada's higher.

Also, Oct 14 China Ministry of Agriculture announced that China’s sow inventory is down 38.9 percent in September from a year ago and pig herd down 41.1 percent. Although these numbers are different than ours and many others estimates, it indicates massive decline. The number also indicates continual decline with the sow herd down 1.5 percent and pig herd 2.4percent from a month ago.

Take home message - China’s supply of pork is going to decline continually over the next months and with hog prices already $2.11 US lb., where is the high?

Alberta

Last week we attended the Alberta Livestock Expo, held in Lethbridge. It was very nice to visit with many customers. In this region Genesus has over 50 plus customers.

Like the rest of the USA-Canada, industry producers are not happy with the current hog price. Current prices don’t work if you want to make money. Hope comes with future prices that show profits in the coming months. Many producers at the Lethbridge conference were booking advanced sales to lock in future profits.

One of the highlights at the annual Lethbridge Ag Expo is the Carcass competition. Hogs are judged at Maple Leaf Foods- Lethbridge Plant. The contest is a combination of back fat, loin depth, belly colour and marbling.

Genesus customer Rosedale was No. 1, Big Bend No.2. While Elm Springs and Fairlane came after third place, Genesus 4 of top 5 is further confirmation by third party judge that Genesus has the World’s Best Pork.