U.S. lean hog futures dropped by as much as the daily trading limit on Thursday, Reuters reports. The rising tensions between Washington and Beijing could limit U.S. pork purchases by China, the world’s largest consumer of pork.
Maintaining good relations with China is very important to the U.S. pork industry, says National Pork Producers Council (NPPC) CEO Neil Dierks.
China has drastically ramped up imports of U.S. pork since last year after African swine fever (ASF), a deadly disease of pigs only, destroyed nearly half of China’s hog herd.
“China needs protein, Dierks says. “And it isn't just pork protein they're bringing in because they're trying to replace protein. It’s an important market for us.”
At the beginning of the year, Dermot Hayes, an economist at Iowa State University, estimated that 10% of U.S. pigs would be exported to China. Dierks says the last update he saw for the first three months of the year was closer to 12%.
“From all the available information that I see, the price of pork in China has come down some from these astronomical levels they've been at, but it's still pretty astronomical. It's important for us that our government be talking with the Chinese and that we avoid having any direct confrontations,” Dierks says.
Chicago Mercantile Exchange (CME) June lean hogs ended 3.250 cents lower at 56.925 cents per lb. Most-active July futures traded limit-down but ended 3.650 cents lower at 55.650 cents per lb., Reuters reports.
COVID-19 continues to create ripple effects in the supply chain. Concerns over market disruptions and pork plant closures due to COVID-19 infections among workers are also impacting prices, Reuters reports.
“COVID-19 has been an equal opportunity virus in the world. Some of our global competitors have had similar problems as the U.S. has on capacity and their ability to export. So, China remains an important market,” Dierks says.
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