Glacier FarmMedia COVID-19 & the Farm



The Good, Bad & Ugly

The Good, Bad & Ugly

The Good: Chinese CPI data released this evening indicates that food prices have dropped dramatically over last year. The main drop has been in pork, which has registered a 8.1 per cent year on year drop in prices. The drop in pork prices is due to recovering production from the Asian Swine Fever (ASF) outbreak that decimated the Chinese herd. The recovery in production is good news for both the corn and soybean markets. Given the recovery in demand for soybeans in China and the tightening supplies in Brazil, soybean exports from the U.S. to China will gain momentum over the next six months. This should help support soybean prices until the harvest begins in September. This is good news for canola, which needs some support from soybeans to move markets higher. The canola chart is looking positive (weekly chart below) as the 20 and 40 day moving averages have crossed and are pointing to an upward move.

The Bad: Hog markets in the U.S. continue to drop as demand and plant closures due to COVID19 push prices lower. After some brief optimism in May the market has headed lower over the past month and is looking to test the mid April lows. The news from China on increasing pork production is not good news for the U.S. hog sector as this will lower export prices to China. The futures markets are projecting live hog prices to remain below 60 cents per pound through the rest of 2020. Hog numbers and pork production in the U.S. are expected to decline over the next six months as the low prices take their toll. Consumption of soybean meal and corn will be hit by the decline in domestic pork production.

The Ugly: Stock indices dropped today as the reality of the slow return to normal economic activity began to pierce the recent market euphoria. The U.S. S&P 500 was down only 0.78 per cent on the day, but the Dow Jones Industrial average was down by 1.09 per cent. The equity markets are essentially priced for a perfect recovery in the U.S., despite increasing numbers of cases in some states that have opened up. The U.S. will surpass two million cases of COVID19 on Thursday or Friday. This news will likely put a damper on the thought of a quick recovery from the pandemic. As an example, North Dakota has more than double the cases of COVID19 than Manitoba and Saskatchewan combined despite having one quarter of the population of the two provinces.