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| Daily Intelligence Briefing |
| Identifying Change-Driven Investment Themes |
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| Each Daily Intelligence Briefing has five sections, click the blue links to jump to the relevant section for more extensive coverage: |
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| I. TODAY’S MARKET INSIGHT |
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| Global Disease Outbreak Pushes Hog Prices Higher, Setting Up Bumper Profits for Some Producers |
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| Hog Prices are Soaring on concerns that a deadly virus that has hit the world’s largest producers of pork products will cause supplies to tighten. Chinese production could fall as much as 30%, which could help revive exporters of US pork. |
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| African Swine Fever, the worst disease outbreak to hit the global pork industry, is ravaging herds across the world and creating a potential pork shortage in some key markets. The virus, which does not affect humans, is passed through contaminated feed or exposure to infected animals and can survive in frozen pork for years. Infection carries a near-100% fatality rate for the animal and there is no vaccine.
Pig farms across Asia and Europe have been contaminated, including large-scale Chinese farms, which is causing alarm for the country’s $1 trillion pig industry. To provide some context, pork accounts for two-thirds of China’s meat consumption and is considered such an important food staple that the government maintains a strategic pork reserve. Pig production capacity had already been falling in the past two years. Now, African Swine Fever is forcing farmers to cull their herds at the first hint of contamination. About 1 million pigs have been slaughtered so far to try to control the spread.
One market pundit is calling the epidemic a “global pork black swan event… Greater than 15% of China’s sow herd has been liquidated already. Conservatively, I believe production will be down over 30% after liquidation stops.”
With pig supplies tightening, Chinese hog prices have soared to their highest price in 14 months and could keep rising if the disease continues to deplete China’s vast pig herd supply. Even though demand is typically weak at this time of year, live hog prices across the country surged almost 20% since early March.
On the other side of the world, US farmers are hoping that a pending shortage in China will boost imports from the United States. In January, the hog-breeding herd in China fell 15% from a year earlier. If pork production falls by that same percentage in the second half of 2019, China may have to import 1.54 billion pounds a month to maintain supplies. Anticipation of such an event has spurred a sudden rally in hog futures in US.
The timing could not be better for US hog farmers.
Almost one-quarter (22%) of the pork produced in the United States is typically exported to foreign markets. But the total volume of exports dropped after retaliatory tariffs were placed on US pork in 2018 by China and Mexico, two of the biggest buyers of US pork. Beijing went so far as to impose tariffs as high as 62% on US pork products.
The ensuing decline in export demand, coupled with a secular shift in US meat consumption patterns
pushed US hog prices to a 16-year low. The US Department of Agriculture (USDA) reports that live prices in January and February have averaged below $40 per hundredweight, the lowest February price since 2003. Meanwhile, per-capita US supplies are nearing their highest levels in 19 years.
US producers are counting on the Trump administration’s ability to secure new trade deals with China and Mexico this year to help reverse that trend. China has more than half of the worlds’ hogs, and the European Union is the second biggest producer of pork after China and the largest exporter. But, the United States holds the distinction of being the lowest-cost producer, which is why US pork is often the most affordable on the planet. If trade barriers are reduced and foreign demand picks up, some experts see current US live hog prices jumping more than 35% to the mid-$50s per hundredweight by autumn.
Investors seeking to capitalize on rising hog prices can gain exposure via the Lean Hogs ETC (HOGS.L).
In the meantime, Chinese farms that can limit their exposure to African Swine Fever or avoid it altogether should experience bumper profits in the months ahead. Some mega pork producers with operations in China include WH Group Limited (WHGLY), Wens Foodstuff (300498.SZ) and Muyuan Foodstuff (002714.SZ). WH Group, which boasts multi-country headquarters in the US, Hong Kong and China, is the largest pork company in the world, especially following its acquisition of US-based Smithfield Foods in 2013. Its global platform integrates hog production, hog slaughtering and the processing and distribution of packaged meats and fresh pork, placing it in the No. 1 position in key segments of the pork industry.
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| Source material for today's market insight... |
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| Hogs A Pig-Breeding Shift in China Spurs a Rally in Hog Futures in the U.S.
China, the world’s biggest consumer of pork, appears poised to boost imports, lifting U.S. hog futures from the doldrums. Spot pig prices in China surged 12 percent since March 8 to the highest in 23 months, and the shares of hog companies are trading at lofty multiples. Investors are betting on a supply squeeze after African swine fever spread to almost all of the Asian nation’s provinces, forcing farmers to cull animals.
In January, the hog-breeding herd in China fell 15 percent from a year earlier, the Hightower Report in Chicago said. If pork production falls by that percentage in the second half of the year, the country would have to import 1.54 billion pounds a month to maintain supplies, the analyst said. “The turn higher in China’s pork prices is a bullish force, and it may help pull pork prices from around the world higher, as China is likely to become an active importer,” Hightower said.
On the Chicago Mercantile Exchange, hog futures for June settlement jumped 6.3 percent in the past three sessions to 80.25 cents a pound. On Tuesday, the price reached 80.425 cents, the contact’s highest since Jan. 11. On Feb. 20, the price touched a six-month low, while April hogs slumped to a record.
Read the full article + |
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| Hogs Cost of retaliatory duties mounts on U.S. pork
For many years, U.S. pork has enjoyed duty-free status in Mexico under the North American Free Trade Agreement. But in June of last year, in response to U.S. tariffs on imports of steel and aluminum, Mexico’s duty rate on U.S. pork muscle cuts increased from zero to 10%, and the rate jumped to 20% in July. Mexico also imposed a 15% duty on sausages and a 20% duty on some prepared hams and shoulders.
The impact of these retaliatory duties was felt immediately. Through May 2018, pork exports to Mexico appeared to be sailing toward a seventh consecutive volume record, running 6% ahead of the torrid pace of 2017. But year-over-year export volume declined in every month thereafter, and finished 2018 down 3% (777,143 mt).
This is still a strong volume figure — the second-largest on record and 6% higher than in 2016 — but keep in mind that volume swung from 6% higher year-over-year to 3% lower over a seven-month period. Had export volume simply been steady with 2017 in the final seven months of the year, exports would have ended 2018 at a record-shattering 821,000 mt.
The impact on pork export value to Mexico is even more telling, with the final 2018 total falling 13% year-over-year to $1.31 billion — the lowest since 2015. The June-December decline equated to $218 million, or an average decrease of $31.1 million per month.
Read the full article + |
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| Hogs How Will Pork Industry Survive Trying Times?
The future belongs to those who can adapt to change and gain the best market access, said Brett Stuart of Global AgriTrends at the 2019 American Association of Swine Veterinarians annual meeting in Orlando on Monday. With global population rising by 78 million per year, the U.S. pork industry has a great opportunity to help meet the protein needs of a growing world population.
Stuart said he sees the next significant export growth opportunities as a basket of markets, not one single market. With duty-free access to Colombia, Chile, Central American nations (CAFTA and the Dominican Republic), the U.S. will be a strong force in those markets. But there are other regions of the world seeking more pork, he added. The EU and Brazil sent a combined $374 million in pork to Africa last year. The U.S. sent just $2.6 million.
“A new U.S. agreement with South Africa is beneficial, as would be a potential agreement with Nigeria, hinted to by Nigerian President Buhari in meetings with President Trump last year,” Stuart said. “Granted, Africa is a unique market, but remember that U.S. pork prices (think hams and offal) are very competitive globally.” Tapping into new markets holds the key to U.S. export growth. And the U.S. is well poised to capitalize on new opportunities, he said.
Read the full article + |
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| Hogs China’s soybean demand has been hit by swine fever, raising doubts about Beijing’s trade promises
As the U.S. and China continue to negotiate a trade deal aimed at satisfying both sides, soybeans are emerging as a bargaining chip for Beijing to use as leverage in those talks. But while Beijing has pledged to buy more American soybeans, analysts question if China — the world's largest consumer of the oilseed — has the appetite for it.
In addition to tariffs brought on by the ongoing trade dispute, falling import numbers and an outbreak of African swine fever in China have added to concerns that the world's second largest economy may not be able to live up to its pledges to buy more. According to U.S. Agriculture Secretary Sonny Perdue, China has committed to buying an additional 10 million metric tons of U.S. soybeans. Beijing has also reportedly offered to purchase more than $30 billion in American agricultural produce a year as part of a trade deal.
Last year, China's soybean imports from the U.S. hit its lowest in a decade. More recently, customs data showed that soybean imports in February fell to their lowest monthly level in four years — or 17 percent lower than a year ago.
Read the full article + |
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| II. MARKET INSIGHT UPDATES |
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| Markets → |
| ETFs Forget No Fees. ETF Breaks Ground by Offering to Pay Investors. |
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| Economics & Trade → |
| Greece IMF: Greece among best performers in eurozone |
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| Finance → |
| Lending White House Might Put Colleges on the Hook for Student Loans |
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| Construction & Real Estate → |
| China Property Wall Street wants slice of China's booming rental housing market |
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| Services → |
| Cannabis Why Pot May Be Closer To Mainstream As Nelson Peltz Advises Aurora Cannabis |
| Streaming Microsoft demonstrates xCloud game streaming a week before Google’s ‘future of gaming’ event |
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| Technology → |
| 5G Verizon to start 5G mobile service in two U.S. cities from April |
| China-US Tech Race America’s Undersea Battle With China for Control of the Global Internet Grid |
| China-US Tech Race China Is Catching Up to the US in AI Research–Fast |
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| Transportation → |
| Airlines The Companies That Really Suffer From the 737 MAX Debacle |
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| Commodities → |
| Hogs A Pig-Breeding Shift in China Spurs a Rally in Hog Futures in the U.S. |
| Hogs Cost of retaliatory duties mounts on U.S. pork |
| Hogs How Will Pork Industry Survive Trying Times? |
| Hogs China’s soybean demand has been hit by swine fever, raising doubts about Beijing’s trade promises |
| Ethanol Trump's EPA unveils plan to pump up ethanol as Big Oil cries foul |
| Oil THEME ALERT Venezuela's Guaido readies to open up oil industry after years of nationalization |
| Oil THEME ALERT U.S. Supermajors Could Form A New Oil Cartel |
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| Energy & Environment → |
| Solar THEME ALERT Utility-Scale Solar Projections Now Exceed Pre-Tariff Forecasts |
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| Endnote → |
| Luxury The Luxury Assets Soaring in Value |
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| III. ACTIVE THEMATIC IDEAS |
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| Select a theme to see when and why we added it. Also included is a link to all recent Market Insight reports we've written about that theme, allowing you to track its progress. |
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| IV. MACROECONOMIC INDICATORS |
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| US MBA Mortgage Applications Rebound in Latest Week
Mortgage applications in the United States rose 2.3 percent in the week ended March 8th 2019, rebounding from a 2.5 percent decline in the previous week, data from the Mortgage Bankers Association showed. The average fixed 30-year mortgage rate went down by 3bps to 4.64 percent.
Click here to access the data + |
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| US Construction Spending Rises the Most in 9 Months
US construction spending surged 1.3 percent from a month earlier to a seasonally adjusted annual rate of USD 1.28 trillion in January 2019, reversing an upwardly revised 0.8 percent drop in December and easily beating market expectations of 0.4 percent. It was the biggest increase in construction spending since April.
Click here to access the data + |
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| US Producer Prices Rebound Less than Expected in February
Producer prices for final demand in the US increased by 0.1 percent month-over-month in February of 2019, recovering from a 0.1 percent fall in January and below market expectations of a 0.2 percent gain. On a yearly basis, producer prices rose 1.9 percent and the core index advanced 2.5 percent.
Click here to access the data + |
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| US Durable Goods Orders Unexpectedly Rise
New orders for US manufactured durable goods increased 0.4 percent from a month earlier in January of 2019, following an upwardly revised 1.3 percent advance in December and beating market expectations of a 0.5 percent drop. Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, went up 0.8 percent, the highest gain since July and rebounding from a 0.9 percent fall in December.
Click here to access the data + |
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| US Crude Oil Inventories Unexpectedly Fall
US crude oil stocks decreased by 3.862 million barrels in the week ended March 8th of 2019, following a 7.069 million rise in the previous week and missing market expectations of a 2.824 million gain. Meanwhile, gasoline inventories fell by 4.624 million barrels, after a 4.227 million decline in the previous week.
Click here to access the data + |
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| UK Rules Out No-Deal Brexit
British lawmakers voted 312 to 308 in favor of the Spelman amendment ruling out a no-deal Brexit under any scenario. The amendment went further than the government's motion - also backed by MPs - which stated that leaving without a deal remained the legal default unless a deal is agreed. The pound extended gains and was trading at $1.326 following the result.
Click here to access the data + |
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| OBR Cuts UK Growth Forecast for 2019
The OBR has lowered its UK growth forecast for this year to 1.2 percent on Wednesday from 1.6 percent in last October’s budget, due to uncertainty surrounding Brexit negotiations and slowing global growth. Still, the OBR's projection for 2020 was unchanged at 1.4 percent; while that for 2021 is now seen at 1.6 percent, above previous estimates of 1.4 percent.
Click here to access the data + |
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| February 28, 2019 |
| After the Inflation Intermission → |
| Headline inflation has shifted into a downtrend over the past few months, largely due to a sharp decline in energy prices toward the end of 2018. The core CPI, however, shows that, aside from food and energy, inflation remains above 2%.While the Fed is going to need more than that to shift them out of their “patient” position on interest rates, MRP believes thata rebound in the price of crude oil and other commodities, as well as consumer staples and other finished goods will continueto push inflation higher throughout 2019. |
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| II. MARKET INSIGHT UPDATES |
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| MARKET INSIGHT UPDATES: SUMMARIES |
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| ETFs Forget No Fees. ETF Breaks Ground by Offering to Pay Investors
Free is no longer cheap enough in the ultra-competitive market for exchange-traded funds. Salt Financial, which currently runs one $10 million ETF, plans to woo buyers with a fund that will temporarily pay them to invest, according to regulatory filings. During the first year, holders will receive 50 cents for every $1,000 in a new low-volatility stock ETF -- until it grows to $100 million when the cash-back benefit will be capped and shared with all investors. The rebate is until at least April 2020, when a $2.90 management fee could kick in.
Asset managers are getting increasingly aggressive on price as they seek to stand out in an ETF marketplace with more than 2,000 options. Salt Financial plans to fast-track its growth by undercutting them all. If the move is successful and lures investments quickly, that could allow the company to overcome minimum-asset requirements enforced by some large broker-dealers that restrict which funds their advisers can buy.
Read the full article + |
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| Greece IMF: Greece among best performers in eurozone
Greece has entered a period of economic growth that puts it "among the best performers in the eurozone". That rather striking judgement comes from the International Monetary Fund in a new report on the Greek economy. A senior IMF official said there were a lot of positive developments to point to. That said, the IMF said the economy remains vulnerable, further reforms are needed and unemployment remains unacceptably high.
Last year, Greece managed growth of slightly more than 2% for the first time in more than decade. This year, the IMF forecasts somewhat better. Peter Dohlman, the IMF's mission chief for Greece, says that's enough to put Greece "in the upper tier of the eurozone growth table".
It is certainly progress, indeed a striking change in performance, though the favourable comparison does partly reflect the slowdown that has hit the eurozone as a whole in the last year.
It is also important to recall how much damage the Greek economy has suffered. It is still about 24% smaller than before the crisis. Unemployment has come down markedly, including for young people. But it still very high: 18.5% for the adult population as a whole and close to 40% for the young.
Read the full article + |
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| Lending White House Might Put Colleges on the Hook for Student Loans
The White House is weighing a measure that would require colleges and universities to take a financial stake in their students’ ability to repay government loans, an effort that could squeeze loan availability to students and reduce defaults.
For several months, Trump administration officials have been discussing enacting such a mechanism or making a push for one in Congress as part of a broader effort to combat rising college costs.
In the administration’s budget proposal released Monday, officials made brief mention of a “request to create an educational finance system that requires postsecondary institutions that accept taxpayer funds to have skin in the game through a student loan risk-sharing program.”
Such a proposal could be included in a coming executive order addressing higher education, several officials said. A draft of the order isn’t final and the specifics of exactly how a skin-in-the-game provision would work haven’t been laid out. It also isn’t clear whether the White House will back an administration proposal or urge Congress to take one up.
Read the full article + |
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| Construction & Real Estate |
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| China Property Wall Street wants slice of China's booming rental housing market
Wall Street is pouring funds into China's rental housing market as startups capitalize on government support for the sector and a growing population of renters. In a $150 million funding round announced this week, New York-based private equity firm Warburg Pincus strengthened its position in Mofang Apartments, a Shanghai-based rental startup. The round was led by Canada's second-largest pension fund, Caisse de depot et placement du Quebec.
Warburg Pincus had already led several investments in Mofang, including a $300 million round in 2016. The company also made the headlines last year when it led a $621 million round in Ziroom, a similar rental housing startup based in Beijing. Ziroom is backed by Chinese tech giant Tencent Holdings and Sequoia China, a venture capital firm.
This month, Mofang's younger rival, Beijing-based Danke Apartments, announced it had raised $500 million from a group of investors led by Ant Financial and second-time investor Tiger Global, a New York-based hedge fund.
Morgan Stanley also entered the arena last year when it led a $100 million investment in Shanghai-based rental startup QingKe, alongside Singapore private equity firm Crescent Point.
Read the full article + |
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| Cannabis Why Pot May Be Closer To Mainstream As Nelson Peltz Advises Aurora Cannabis
Canadian cannabis producer Aurora Cannabis (ACB) has appointed activist investor Nelson Peltz as a strategic advisor, potentially helping the company strike deals with mainstream consumer-goods companies that the cannabis industry has increasingly turned to for cash and legitimacy. Aurora Cannabis stock surged on the news, but marijuana stocks were mixed.
Meanwhile, Hexo (HEXO), the Canadian producer that struck a beverage partnership with Molson Coors (TAP) last year, said it would acquire Newstrike Brands, a company supported by members of the Canadian rock group the Tragically Hip.
Peltz, in a statement, said he hoped to use the appointment to evaluate Aurora's "many operational and strategic opportunities, including potential engagement with mature players in consumer and other market segments." Peltz's involvement in the food industry also runs deep. He is the nonexecutive chairman of Wendy's (WEN) and a director of Procter & Gamble (PG). He was also a director of Mondelez (MDLZ), which owns Oreo. Peltz also once held that position with H.J. Heinz Co.
Read the full article + |
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| Streaming Microsoft demonstrates xCloud game streaming a week before Google’s ‘future of gaming’ event
Microsoft has provided a live demonstration of its upcoming Project xCloud game streaming service. The software maker originally unveiled xCloud last year, promising a cloud gaming service that streams games to PCs, consoles, and mobile devices. While CEO Satya Nadella promised trials later this year, we’ve still not heard a lot of detail about xCloud or when it will fully appear.
Microsoft’s reminder that xCloud exists and will enter public trials later this year comes just as Google is preparing to unveil what it calls “the future of gaming.” Google has teased it will unveil its vision for gaming at the Game Developers Conference (GDC) next week. Google is rumored to be publicly launching its own game streaming service, and the company may unveil its own game controller alongside the service.
Google isn’t the only competitor that Microsoft will face in cloud streaming, though. Sony has its own PlayStation Now service, and even lets you remotely play your PS4 games from an iPhone or iPad. Nvidia runs its GeForce Now game streaming service, and Shadow and Liquid Sky are also attempting to convince players that game streaming is the future. Microsoft and Google might be the big tech companies making noise about game streaming this year, but Amazon also looks like it will eventually stream games to your home.
Read the full article + |
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| 5G Verizon to start 5G mobile service in two U.S. cities from April
Verizon Communications Inc beat rivals AT&T and Sprint in the race to launch the first fifth generation mobile services in two cities in the United States at an additional cost of $10 for customers with existing unlimited plans. Users in Chicago and Minneapolis will be able to avail the 5G wireless network from April 11 by using a Motorola Z3 mobile and a 5G “Moto Mod”, a physical magnet-like attachment for the phone, the telecommunications company said.
AT&T Corp and Sprint Corp are also building their 5G networks and plan to release 5G smartphones with Samsung Electronics later this year. 5G, the next-generation wireless network, is expected to offer data speeds up to 50 or 100 times faster than 4G networks.
Verizon, which plans to expand to more than 30 U.S. cities in 2019, launched its first commercial 5G service in October when its 5G Home offering went live in Houston, Indianapolis, Los Angeles and Sacramento.
While Verizon is leading the charge to test its 5G services, industry analysts say the higher-speed networks are unlikely to be widely available until the middle of the next decade.
Read the full article + |
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| China-US Tech Race America’s Undersea Battle With China for Control of the Global Internet Grid
While the U.S. wages a high-profile campaign to exclude China’s Huawei Technologies Co. from next-generation mobile networks over fears of espionage, the company is embedding itself into undersea cable networks that ferry nearly all of the world’s internet data. About 380 active submarine cables—bundles of fiber-optic lines that travel oceans on the seabed—carry about 95% of intercontinental voice and data traffic, making them critical for the economies and national security of most countries.
Current and former security officials in the U.S. and allied governments now worry that these cables are increasingly vulnerable to espionage or attack and say the involvement of Huawei potentially enhances China’s capabilities. Huawei denies any threat. The U.S. hasn’t publicly provided evidence of its claims that Huawei technology poses a cybersecurity risk. Its efforts to persuade other countries to sideline the company’s communication technology have been met with skepticism by some.
Huawei Marine Networks Co., majority owned by the Chinese telecom giant, completed a 3,750-mile cable between Brazil and Cameroon in September. It recently started work on a 7,500-mile cable connecting Europe, Asia and Africa and is finishing up links across the Gulf of California in Mexico.
Read the full article + |
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| China-US Tech Race China Is Catching Up to the US in AI Research–Fast
In 2017 the country’s government announced a new artificial intelligence strategy that aims to rival the US in the crucial technology by 2020. The latest data on the output of US and Chinese AI researchers suggest China is on track.
Chinese researchers have published more AI research papers than the US for several years, but questions have lingered about the quality and influence of those publications. A new analysis by the Allen Institute for AI shows that China’s share of top AI publications is rapidly approaching that of the US. If current trends continue, the two nations will produce an equal share of top AI publications by 2020.
The Allen Institute analyzed data on more than 2 million AI research publications through the end of 2018 from its Semantic Scholar academic search engine. Comparing US and Chinese AI publications makes it clear that China was an emerging powerhouse of AI research well before the recent national strategy was launched. The country has published more AI papers than the US since 2005, according to Semantic Scholar data.
Read the full article + |
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| Airlines The Companies That Really Suffer From the 737 MAX Debacle
Stock investors have punished Boeing after two deadly crashes involving its 737 MAX jet. But some of its clients in the airline industry look more vulnerable to the fallout.
On Wednesday, more aviation authorities, including in Hong Kong and New Zealand, joined the U.K., China and others in grounding the 737 MAX. The moves follow concerns that the plane’s stall-prevention feature, which is believed to have played a role in October’s Lion Air crash in Indonesia, may also be implicated in last weekend’s Ethiopian Airlines disaster.
Boeing’s stock has dropped 10% so far this week. Yet history suggests that plane makers are capable of quickly bouncing back from such setbacks. The same may not be true for some cash-strapped airlines.
Since the weekend, airline stocks have fallen in fairly close correlation with the proportion of 737 MAX planes in their fleets. U.S. and Canadian airlines have been less affected because their regulators still allow the jet to fly. Norwegian Air and Icelandair have been hit particularly hard. Their stocks are down 10% and 17%, compared with 737 MAX exposure of 11% and 14% of their fleets, respectively.
Read the full article + |
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| Hogs A Pig-Breeding Shift in China Spurs a Rally in Hog Futures in the U.S.
China, the world’s biggest consumer of pork, appears poised to boost imports, lifting U.S. hog futures from the doldrums. Spot pig prices in China surged 12 percent since March 8 to the highest in 23 months, and the shares of hog companies are trading at lofty multiples. Investors are betting on a supply squeeze after African swine fever spread to almost all of the Asian nation’s provinces, forcing farmers to cull animals.
In January, the hog-breeding herd in China fell 15 percent from a year earlier, the Hightower Report in Chicago said. If pork production falls by that percentage in the second half of the year, the country would have to import 1.54 billion pounds a month to maintain supplies, the analyst said. “The turn higher in China’s pork prices is a bullish force, and it may help pull pork prices from around the world higher, as China is likely to become an active importer,” Hightower said.
On the Chicago Mercantile Exchange, hog futures for June settlement jumped 6.3 percent in the past three sessions to 80.25 cents a pound. On Tuesday, the price reached 80.425 cents, the contact’s highest since Jan. 11. On Feb. 20, the price touched a six-month low, while April hogs slumped to a record.
Read the full article + |
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| Hogs Cost of retaliatory duties mounts on U.S. pork
For many years, U.S. pork has enjoyed duty-free status in Mexico under the North American Free Trade Agreement. But in June of last year, in response to U.S. tariffs on imports of steel and aluminum, Mexico’s duty rate on U.S. pork muscle cuts increased from zero to 10%, and the rate jumped to 20% in July. Mexico also imposed a 15% duty on sausages and a 20% duty on some prepared hams and shoulders.
The impact of these retaliatory duties was felt immediately. Through May 2018, pork exports to Mexico appeared to be sailing toward a seventh consecutive volume record, running 6% ahead of the torrid pace of 2017. But year-over-year export volume declined in every month thereafter, and finished 2018 down 3% (777,143 mt).
This is still a strong volume figure — the second-largest on record and 6% higher than in 2016 — but keep in mind that volume swung from 6% higher year-over-year to 3% lower over a seven-month period. Had export volume simply been steady with 2017 in the final seven months of the year, exports would have ended 2018 at a record-shattering 821,000 mt.
The impact on pork export value to Mexico is even more telling, with the final 2018 total falling 13% year-over-year to $1.31 billion — the lowest since 2015. The June-December decline equated to $218 million, or an average decrease of $31.1 million per month.
Read the full article + |
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| Hogs How Will Pork Industry Survive Trying Times?
The future belongs to those who can adapt to change and gain the best market access, said Brett Stuart of Global AgriTrends at the 2019 American Association of Swine Veterinarians annual meeting in Orlando on Monday. With global population rising by 78 million per year, the U.S. pork industry has a great opportunity to help meet the protein needs of a growing world population.
Stuart said he sees the next significant export growth opportunities as a basket of markets, not one single market. With duty-free access to Colombia, Chile, Central American nations (CAFTA and the Dominican Republic), the U.S. will be a strong force in those markets. But there are other regions of the world seeking more pork, he added. The EU and Brazil sent a combined $374 million in pork to Africa last year. The U.S. sent just $2.6 million.
“A new U.S. agreement with South Africa is beneficial, as would be a potential agreement with Nigeria, hinted to by Nigerian President Buhari in meetings with President Trump last year,” Stuart said. “Granted, Africa is a unique market, but remember that U.S. pork prices (think hams and offal) are very competitive globally.” Tapping into new markets holds the key to U.S. export growth. And the U.S. is well poised to capitalize on new opportunities, he said.
Read the full article + |
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| Hogs China’s soybean demand has been hit by swine fever, raising doubts about Beijing’s trade promises
As the U.S. and China continue to negotiate a trade deal aimed at satisfying both sides, soybeans are emerging as a bargaining chip for Beijing to use as leverage in those talks. But while Beijing has pledged to buy more American soybeans, analysts question if China — the world's largest consumer of the oilseed — has the appetite for it.
In addition to tariffs brought on by the ongoing trade dispute, falling import numbers and an outbreak of African swine fever in China have added to concerns that the world's second largest economy may not be able to live up to its pledges to buy more. According to U.S. Agriculture Secretary Sonny Perdue, China has committed to buying an additional 10 million metric tons of U.S. soybeans. Beijing has also reportedly offered to purchase more than $30 billion in American agricultural produce a year as part of a trade deal.
Last year, China's soybean imports from the U.S. hit its lowest in a decade. More recently, customs data showed that soybean imports in February fell to their lowest monthly level in four years — or 17 percent lower than a year ago.
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| Ethanol Trump's EPA unveils plan to pump up ethanol as Big Oil cries foul
The U.S. Environmental Protection Agency on Tuesday released its proposed rule lifting a summer ban on higher-ethanol blends of gasoline to help farmers, putting the agency on a collision course with Big Oil which has called the move illegal.
The proposal to broaden sales of the so-called E15 rule marks the latest flashpoint in an ongoing battle between the corn and oil industries - two crucial constituencies for President Donald Trump - over America’s biofuels policy.
Corn farmers support any move by Washington that would expand their sales into the multibillion-gallon biofuel market, but oil companies dislike the competition and refiners say adding ethanol to their fuel costs them a fortune.
“Consistent with President Trump’s direction, EPA is working to propose and finalize these changes by the summer driving season,” said EPA Administrator Andrew Wheeler in a press release. “We will be holding a public hearing at the end of this month to gather important feedback.”
E15 gasoline contains 15 percent ethanol, versus the 10 percent in most U.S. gasoline. A summertime ban on E15 had been imposed years ago over concerns that it contributes to smog in hot weather, though recent studies have shown its impact on air quality may not be significantly different from that of E10.
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| Oil Venezuela's Guaido readies to open up oil industry after years of nationalization
Venezuelan congress head Juan Guaido is preparing a groundbreaking reversal of late President Hugo Chavez’s energy industry nationalization, allowing private companies a bigger role in its oilfields and shrinking state-run PDVSA, according to opposition advisers and a draft seen by Reuters.
To Guaido, the self-declared interim president seeking to oust President Nicolas Maduro, the proposal is vital to reverse the collapse of the OPEC-member nation’s oil industry. Oil provides 90 percent of Venezuela’s export revenue, and such a move could win Guaido support among foreign energy companies to help finance a desperately-needed rebuilding, after crude production has fallen to a seven-decade low.
“We need to change the current framework ... we need to open up the oil industry to private investment,” said Ricardo Hausmann, Guaido’s delegate to the Inter-American Development Bank. Speaking at an energy conference in Houston, Hausmann said that PDVSA’s role had to be limited due to its operational and financial weakness.
However, the plan’s impact will remain symbolic as long as Maduro remains in power. Despite being disavowed by 50 governments who recognize Guaido as the country’s legitimate leader, Maduro continues to control Venezuela’s military and its oilfields.
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| Oil U.S. Supermajors Could Form A New Oil Cartel
The ambitious shale growth plans of the U.S. supermajors could in the future allow them to control so much of U.S. shale oil production that they could also control the price of the U.S. light tight oil going to foreign markets in an ‘OPEC of their own kind,’ Investing.com quoted John Kilduff, founding partner at Again Capital, as saying.
If the U.S. supermajors, such as Exxon and Chevron, end up controlling a lot of the U.S. shale production with their plans to significantly boost Permian production, and if smaller shale players bleed cash and decide to sell acreage and operations to Big Oil, then supermajors could be the ones determining the price of light crude oil, according to Kilduff.
Exxon and Chevron both announced increased targets for their Permian production last week. Chevron now sees its Permian unconventional net oil-equivalent production rising to 600,000 bpd by the end of 2020, and to 900,000 bpd by the end of 2023. Exxon revised up its Permian growth plans to produce more than 1 million oil-equivalent barrels per day by as early as 2024, which would be an increase of almost 80 percent.
According to Kilduff, as carried by Investing.com, “The stars are aligning for the super majors to take control of shale and determine pricing for light crude in Asia, if not the world. They’ll be OPEC by a different name.”
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| Solar Utility-Scale Solar Projections Now Exceed Pre-Tariff Forecasts
Projections for utility-scale solar growth from 2020 to 2022 now exceed forecasts drafted before the Trump administration’s announcement of Section 201 tariffs, according to a new Solar Market Insight report from energy research and consulting company Wood Mackenzie Power & Renewables.
Many external factors, including global oversupply, a spike in corporate procurements and the passage of California’s SB 100 law mandating 100 percent clean energy, have helped shift the market since the January 2018 tariff announcement. Analysts say the overall health of the industry has blunted the industry’s worst-fear impacts, even if the dynamics of the market look different than they did then.
“It’s absolutely not apples-to-apples, but to me that’s a really important message,” said Colin Smith, a senior solar analyst at Wood Mackenzie Power & Renewables who covers the utility-scale market. “Not only has the market recovered and done really well despite the tariffs, it’s actually to the point where we expect more solar — at least on the utility-scale solar side — than we did in the pre-tariff conditions.”
Smith said WoodMac’s Q1 2019 utility-scale forecast for 2020 is 8 percent higher than its Q4 2017 forecast, released before the administration finalized tariffs. Its 2021 forecast is 19 percent higher than the pre-tariff projection.
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| Luxury The Luxury Assets Soaring in Value
Demand for luxurious items has been rising steadily in line with dramatic growth in the number of super rich individuals worldwide. Last week's 2019 Global Wealth Report from Knight Frank sheds light on some of the luxury items that have gained the most value over the past ten years.
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| About the DIBs and McAlinden Research Partners
McAlinden Research Partners (MRP) publishes daily and other periodic reports on the economy and the markets.
MRP focuses on identifying change in the global economy and offering an investment thesis whenever an opportunity arises that has not yet been recognized by the market. The DIBs are MRP's compilation of articles and data from multiple sources on subjects reflecting change that have potential investment implications for an industry or group of securities. We share these with our clients who may already have or may be considering exposure in the industries affected. The subjects change daily and constitute an excellent update on featured topics. |
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