African Swine Fever is causing alarm in China (along with fears of inflation)

www.economist.com/china/2018/09/08/african-swine-flu-is-causing-alarm-in-china-and-beyond

From the article:

This time the pig fever is stoking fears of inflation. The cost of pork has an inordinate effect on the consumer-price index. With a fifth of the world’s population, China consumes half its pork. The government has set up a strategic pork reserve to keep the price stable. The blue-ear pig-disease episode of 2007 provoked a rise of 87% in pork prices and one of the biggest leaps in inflation for nearly two decades.

 

The call premium in April and June hogs has gotten ridiculous but really paid off for anyone who got in early. I’ve heard the theory that packers are going to be buying up cheap pork while they can now and sticking it in the freezer for potential demand next year (would explain some of the recent cash gains).

I’m also watching Florence very closely because there’s two large Smithfield plants in Clinton NC and Tar Heel NC which make up about 10% of daily capacity and could be taken offline. Would also explain Fridays put action in the October contract although it is trading at a significant premium to the index.

 

h/t Lost_in_Adeles_Rolls

 

Disclaimer: Consult your financial professional before making any investment decision.

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