The virus outbreak has injected uncertainty in global financial markets, which is mirrored in commodity prices
By Jackie Clark
As we progress farther into the new year, African swine fever continues to be a dominant factor influencing the pork industry. However, a new virus, this time affecting human health, is having an impact on financial and agricultural commodity markets worldwide.
“2019, for the U.S. and Canadian hog farmer, was profitable and that trend is expected to continue in 2020,” Abhinesh Gopal, head of commodity research at Farms.com, said. “The issue currently that has been affecting all markets globally, is the coronavirus outbreak.”
The disease, which originated in Wuhan, China, has put doubt into the system.
“It’s kind of a dampener for the market,” Gopal said. “There was talk early in the year of China buying heavily for their Lunar New Year celebration,” however because of the virus, many public places are closed and large gatherings are discouraged, he explained.
“Demand is expected to slow.”
Threats like the coronavirus have a macro effect on global trade. Tourism and travel slows down, retailers and restaurant markets in affected regions have difficulty predicting demand, Gopal explained.
In the wake of African swine fever, exports and pork prices were expected to continue on an upward trajectory, especially with the U.S. and China trade deal coming to fruition and the holiday season in China.
“The Lunar New Year is the most important time of the year for Chinese consumers,” Gopal said.
Instead, the industry saw a dip in pork prices.
“There’s a strong correlation between a dip in the global financial market and almost the same time there was a dip in hog prices as well,” Gopal explained. “Meat demand is very much tied to the health or perceived health of the economy (and there is) too much uncertainty in the market right now because of the coronavirus outbreak.”
Gopal doesn’t expect exports to slow down much due to the virus. In fact, we may still see sizable shipments of pork headed to China. The main impact will be on hog prices, he explained.
A growing domestic market for pork continues to be a key factor in the success of the pork market despite international turmoil.
“Exports are great, but the domestic demand factor has been a saving grace for the North American market,” Gopal said.
Aside from coronavirus, the main trends impacting pork markets in the first quarter of 2020 continue to be African swine fever and international trade agreements.
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