The Hueber Report

While not completely forgotten, obsessing over the U.S./Chinese trade discussions has been shifted to the back burner. The two most critical ag topics are without question, the flooding devastation that has occurred in Nebraska and surrounding states and finally, the recognition of the loss in hog numbers that China (and other nations) have experienced due to the spread of African Swine Fever.   

In Nebraska alone, the preliminary estimate from the governor’s office tells us that there are at least $400 million in losses for the cow-calf industry and $440 million in crop losses and you can bet these numbers will be climbing.  Of course, added to this will be damages to infrastructure, including roads, bridges, and rail transportation as well as a multitude of physical facilities, i.e., grain bins, livestock facilities, homes, etc.  Sadly, it is not difficult to believe that many of these farms impacted will not be able even to begin thinking about putting a crop in the ground this year and for some, will undoubtedly for some it will spell complete financial disaster.  For those of us fortunate enough to be unaffected by this kind of uncontrollable devastation; be generous in all things as the need will be great. 

When it comes to the second topic concerning the hog situation in China and the recent price action, one can only ask, what took so long?  This issue certainly did not happen overnight and as we have discussed numerous times over the past several months, private sources were telling us the losses were far more significant than “official” tallies and that when you have a nation that consumes 50% of the pork eaten globally each year, it stood to reason that imports were going to have to increase.  If there is one thing that the rulers of this nation fear, it is food inflation and or food scarcity and they will do whatever they can to try and control that. It would appear the market awakening began a week ago when it was reported in the weekly export sales that China had made a sizable purchase, but when total inventory numbers were released this week showing a 16% reduction in the herd size, we literally blew the lid off prices. Looking at charts for nearby prices tells only part of the story as the deferred contracts have all pushed through upper limits that have capped these respective months for the past 4 ½ years. Once you have done that, you have moved into a new ball game.

China did show up in the weekly sales list for pork again this week, albeit for a much smaller quantity, 3,000 MT versus 50,300 MT last week but the USDA is estimating they will need to import 2 MMT this year and that may be a conservative estimate.  All that said, we have to keep in mind the negative impact this will have on feed consumption.  Shanghai JC Intelligence now estimates that hog feed consumption in China will be down 25 to 30% this year and overall feed consumption down 12 to 15%. According to information that I have heard, we may have only seen the tip of the iceberg as to the situation in China and other South East Asian countries. 

As for the rest of the export sales this week, they gave us little to cheer about.  Corn posted the best improvement for the week with net sales of 855,900 MT or 33.70 million bushels.  This was more than double last week, but of course, that number was a letdown anyway.  The top buyers this week were Japan with 346.8k MT, followed by South Korea at 193.5k and then Mexico with 127.4k. Wheat also posted an improvement over last week with sales of 298,600 MT or 10.97 million bushels.  This was up 13.5% for the week.  Top purchasers were South Korea with 75.5k MT, followed by Sri Lanka at 65k and Japan with 38.5. Finally, we have beans where we posted sales of 399,500 MT or 14.68 million bushels.  Granted, we could not expect to have another week like last week, and this should bring us back closer to reality.  Top buyers for the week were Germany with 155.9k MT, followed by China at 142.6k and Egypt with 88.7k.