Hog prices could fall further; Futures slump as Covid cases surge

Hog prices could continue falling due to selling pressure: brokerage

Hog prices in China could keep falling in the short term as weaker cash prices triggered panic selling in the market and generated excessive supply in the domestic market despite stronger demand for cured meat, said Everbright Futures in a note to clients.

Cash prices for live hogs in China started retreating at the beginning of November this year with the average price down 13.5% by the end of the month, according to data from China’s Ministry of Agriculture and Rural Affairs.

Prices continued to fall in the first week of December as hog breeding companies ramped up sales due to the expectation of pre-holiday demand.

However, the demand for cured meat has appeared to be lower than expected.

“The current meat curing season is halfway through, and the peak period is shortened. The demand for cured meat is significantly lower than expected, only 20%-30% of last year’s level,” said the brokerage in the note.

Covid Update – Rapid easing continues, generating uncertainty

China has continued to rapidly ease its zero covid measures over the weekend. It was announced that the national travel tracking app, previously required when traveling between cities and provinces, was being scrapped on Tuesday.

The easing of these measures remains chaotic. For example, many places such as schools, hospitals, and elderly care facilities still require proof of a recent negative PCR test to enter, but many PCR testing facilities are being shut down which is leading to very long lines at remaining sites.

At the same time, many commercial venues and offices no longer require PCR tests. That means a large portion of the population will no longer get PCR tests and will test at home and quarantine at home if they catch Covid. Because of this, the official data on cases no longer reflects reality.

Anecdotal reports suggest a relatively widespread outbreak in Beijing. Shanghai is seeing more cases but may not see a widespread outbreak until one or two weeks. The sharp rise in cases is also leading to shortages of medicine, with many pharmacies in Shanghai already being sold out of medication like ibuprofen and paracetamol (acetaminophen).

Due to the policy uncertainty and sharply rising wave of cases, many consumers are continuing to avoid public spaces even as restrictions are eased.

Futures slump as Covid cases surge after China’s reopening

Agricultural futures in China started the week in a bearish tone as traders dumped their positions due to fears of surging Covid cases as the Chinese government continued to scrap Covid-related restrictions and brace for a full reopening.

Many traders and analysts said that many of their families and co-workers have tested positive recently.

China’s health experts expect the peak of this first wave of mass infections will likely occur in the first quarter of 2023.

While China’s reopening is positive for the market, the rising number of cases is keeping residents at home, casting doubt on a short-term demand recovery.