Supply Lines: Good news for bacon lovers

Supply Lines
Bloomberg

American hog producers have been cutting back on the herd for several months, but there are signs they haven't been moving fast enough to keep the market under control.

The pig and hog herd stands at about totaled 79.1 million animals, the USDA said Thursday. That's down about 0.7% from June 1, but it's still record large for this time of year and about 1% bigger than 2019.

The robust supply is good news for bacon eaters but may be less welcomed by hog farmers who have been battered by the pandemic.

Back in March, employees at U.S. pork plants began catching the Covid-19 virus. Eventually, thousands of meat-plant workers tested positive, forcing slaughterhouses to close and sending prices for hogs on their worst-ever rout. The temporary plant closures meant some farmers had no market for their animals and as prices plunged up to 3 million U.S. hogs were culled, according to a CoBank estimate.

Still, the herd reductions may not be enough to end a supply glut.

"Producers have very intentionally slowed growth rates because slaughter capacity wouldn't be there," Ron Plain, professor emeritus at the University of Missouri, said in a webinar sponsored by the National Pork Board. "The numbers may still be too high."

Things could start to turn around. Hogs kept for breeding totaled 6.3 million, down about 2% and a signal that adverse market conditions are slowing expansion.

There have also been some positives for hogs on the demand side. Supplies of pork bellies that are sliced into bacon were down 33% in August from a year ago, according to USDA data. Meanwhile, China has been buying record amounts of American pork after supplies in Asia fell due to the African swine fever virus.

Len Steiner, an analyst at Steiner Consulting Group, said American pork supplies should ultimately be lower in 2020 than in 2019. "The reason is exports," Steiner said on the webinar.

Michael Hirtzer in Chicago 

Charted Territory

The American government is falling behind global rivals when it comes to protecting meatpacking workers from Covid-19 infections. In Germany, the government is ready to upend a labor contracting system that left poorly paid immigrant workers vulnerable. Australia's second-most populous state, Victoria, slashed slaughterhouse staffing capacity to enforce strict spacing requirements. Meanwhile, the U.S. has yet to impose any mandatory safety measures on meatpackers to contain infections, issuing just voluntary guidelines.

Today's Must Reads

  • Java jolt | Brazil's bumper coffee crop is starting to translate into record shipments as growers capitalize on the local currency's slide against the dollar, according to one of the world's largest traders of the commodity.
  • Buying spree | The world's largest agricultural commodity traders are making the most money in years exporting everything from soybeans to corn and wheat from American ports. And it's mostly thanks to China.
  • Frozen transmission | China detected its first local asymptomatic infections in more than a month as two port workers responsible for unloading frozen seafood tested positive, adding to alarm that contaminated imports could be transmitting the coronavirus.
  • Sticky prices | Ignoring persistent food costs can have an undesired effect on policy rate setting in India, where calls are growing to revise the central bank's inflation-targeting framework, according to a new study.
  • Hoarding headache | Three of Britain's main supermarkets have introduced limits on certain products, raising fears that the country could be facing another stockpiling crisis.
  • Pig out | German authorities began building a metal fence along the border with Poland to counter an outbreak of a deadly swine disease that's hit German pork exports.
  • Cattle call | JBS, the world's largest meat producer, is giving the world a response to the rising criticism over its approach to Amazon deforestation.
  • Farm aid | As Republicans and Democrats in Washington try to settle a high-stakes dispute over agriculture aid, a study shows the bulk of billions of dollars in U.S. subsidies going to the country's biggest and richest farms.

On the Bloomberg Terminal

  • Grocery inflation | Rising food prices may be sustained in coming months as the coronavirus pandemic and diplomatic spats disrupt supply chains. Get ready to add La Nina to the mix.
  • Eat at home | General Mills' bonds could be further supported by elevated at-home food demand, which is expected to persist throughout the year. 
  • Use the AHOY function to track global commodities trade flows.
  • Click HERE for automated stories about supply chains.
  • See BNEF for BloombergNEF's analysis of clean energy, advanced transport, digital industry, innovative materials, and commodities.
  • Click VRUS on the terminal for news and data on the coronavirus and here for maps and charts.

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