US Hog Markets: Pork Expected to Benefit from Strong Dollar

US - Country of Origin Labelling, The Bird Flu, and the rising US Dollar. These seem to be the newsworthy events shaping our hog markets, write Allan Bentley and Doug Hayes.
calendar icon 8 June 2015
clock icon 3 minute read

Let’s start with COOL, which was created to play off emotions. When it became law, we do not believe the USDA ever did a study about the true cost of the program to the industry.

The meat industry, however, conducted their own studies to determine the estimated cost of COOL's implementation and how those resulting costs might change demand.

Industry leaders also looked at whether consumers were willing to absorb those costs. To us, it appears that it is over, and the backers of COOL need to abandon their efforts.

The Bird Flu is raising havoc with the chicken and turkey industry. This is somewhat a double-edged sword. As chicken exports will be reduced, pork exports may expand to fill the void.

Remember, we also have to consume the chicken domestically that would normally be exported. So, the question is: Can pork exports expand enough to pick up the slack that occurs in the domestic market?

One cannot overlook the fact that we have exterminated 37 million birds. Those buildings are also out of production for a few months. We would guess just in time for the geese to start heading south.

The last issue at hand is the US Dollar. As the North American pork industry has become increasingly reliant on exports, the strength or weakness of the dollar is extremely important to the amount of pork we ship overseas.

Current trends point toward continued US Dollar strength until such time that our economy falters or reverts back to QE.

Examining how poor Greece’s finances are, they recently announced a plan to make good on all of their debt obligations; however, to do that they desperately need AID. We compare that strategy as robbing Peter to pay Paul.

As long as the European Union struggles with a “crisis” like that in Greece, we anticipate the US Dollar will remain the best of the worst.

In summary, the Bird Flu and a strong US Dollar will help to keep corn reasonably “cheap” as long as the weather does not throw in any curve balls.

The elimination of COOL will lower the packer’s costs. The Bird Flu can also increase demand for pork. In adversity, there is always opportunity!

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