Home About Archives RSS Feed

The Independent Investor: Epidemic Pulls Pork Prices Higher

By Bill Schmick
iBerkshires columnist
The African swine fever could cause prices in China to spike 70 percent or more this year. The highly infectious disease is spreading throughout Asia and could lead to a large increase in the price of pork here at home as well.
Before you ask, this highly infectious virus, while deadly to pigs, is not harmful to humans. The problem is that when even one pig is tested positive, the entire herd needs to be slaughtered as quickly as possible. There is no cure.
The government is taking this epidemic seriously, and well it should. Tough new government rules have been implemented this month in Chinese slaughterhouses and processing plants to identify and test for the virus.
The Chinese are the world's largest consumers of pork, accounting for 49 percent of all pork consumed. Domestic hog production, prior to the epidemic, was roughly 700 million pigs. To date, only about a million pigs have been infected, but those figures may be understated. A Shanghai-based consultant company, JCI, is forecasting that pork production will fall by almost 16 percent this year to 8.5 million metric tons. That would leave roughly a 7 million metric ton shortfall in supply.
The government's inspection efforts have slowed down business and reigned in demand, at least temporarily. But given the popularity of pork in China, most producers are believed to have large stockpiles of pork supplies, most of which are in cold storage. As such, Chinese producers are dipping into their cold storage supply to satisfy demand and keep prices somewhat reasonable, at least until the second half of the year.
Given the severity of the epidemic and the wrath of the government, if the present guidelines and restrictions are ignored, producers and distributors don't dare to buy fresh pigs, kill them, or sell the meat until the government gives them an all-clear. In the meantime, the epidemic has spread to Vietnam and Cambodia, which are also big pork consumers, as well as other nations in Asia.
In order to fill China's shortfalls in supply, pork producers in Europe and the U.S. are starting to increase shipments to China. That is despite the fact that U.S. pork exports are subject to a 62 percent tariff, thanks to the tariff war between the U.S. and China.
There are also other side effects to the pork crisis. Soybeans are the major source of pig feed. Less pigs means less demand for soybeans. That also hurts U.S. producers. China had already cut imports from American soybean farmers and the virus simply reduces demand for our exports even further.
Chinese consumers may also be forced to substitute beef and other proteins for pork. That could send prices of beef higher since China already represents 28 percent of the world's meat consumption.
While there have been no known cases of the African virus here, the U.S. is already taking precautions. The National Pork Producers Council recently canceled its 2019 World Pork Expo in Des Moines. Our government also announced increased safety measures to prevent the virus from entering our livestock supply. Most of their effort is focusing on what is called additional attention to "farm biosecurity."
About the only silver lining for America in this stormy situation is the present tariff war. As we plan to levy even higher tariffs on just about all Chinese imports, the risk of importing infected pigs has been dramatically reduced.
Bill Schmick is registered as an investment adviser representative and portfolio manager with Berkshire Money Management (BMM), managing over $400 million for investors in the Berkshires.  Bill's forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.



Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
MCLA Men's Soccer Team Snaps 22-Game Losing Streak
Williams Field Hockey Blanks Smith
Pittsfield Chooses Tyer And Mazzeo For Mayoral Election
Clarksburg Sets Candidate Interviews for Town Administrator
Can 'AI' Help You Become a Better Investor?
Berkshires Beat: Final 3rd Thursday of Season Features Walk a Mile Event
North Adams Happenings: Sept. 18-24
Pittsfield Seeking New Location For Pontoosuc Lake Beach
North Adams Arts Commission Ponders Role in 'Public Facing' Art
Lanesborough Planning Board Extends Solar Permits

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.




@theMarket (301)
Independent Investor (411)
September 2019 (4)
September 2018 (4)
August 2019 (5)
July 2019 (5)
June 2019 (8)
May 2019 (10)
April 2019 (7)
March 2019 (7)
February 2019 (6)
January 2019 (6)
December 2018 (4)
November 2018 (9)
October 2018 (5)
Wall Street Japan Crisis Interest Rates Fiscal Cliff Europe Stock Market Oil Jobs Greece Banks Deficit Recession Housing Debt Ceiling Rally Stimulus Europe Energy Economy Debt Bailout Stocks Currency Congress Election Pullback Commodities Metals Taxes Retirement Euro Markets Federal Reserve Selloff
Popular Entries:
The Independent Investor: Don't Fight the Fed
@theMarket: QE II Supports the Markets
The Independent Investor: Understanding the Foreclosure Scandal
The Independent Investor: Does Cash Mean Currencies?
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: How Will Wall Street II Play on Main Street?
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: Will the Municipal Bond Massacre Continue?
Recent Entries:
@theMarket: Investors Discover Value Stocks
The Independent Investor: Europe Throws in the Towel
@theMarket: Markets Break Out of 3-Month Trading Range
The Independent Investor: Business Roundtable's Change of Heart
@theMarket: The Summer of Financial Discontent
The Independent Investor: The Rising Costs of Hurricanes
The Independent Investor: Will We race to the Bottom?
@theMarket: Tariff Threat Unsettles Markets
The Independent Investor: Brexit: The Never-Ending Story
@theMarket: All Eyes on the Fed