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This would be incredibly bearish for soybean futures, no? (or at least Brazlian ones, as the US tariffs have already cratered Chinese soy imports)
by kickout 7y ago
This would be incredibly bearish for soybean futures, no? (or at least Brazlian ones, as the US tariffs have already cratered Chinese soy imports)
- xwowsersx 7y agoYou mean because it would reduce demand for feed? I think that's right. As far as I can remember, China has to wait until ASF is completely eradicated before beginning to rebuild the herd so it's not like the lost demand from the diseased hogs is being replaced by the new herd. Also, piglets probably require less feed than the mature ones.
- kickout 7y agoYea, that's the logic. Not place for all the world's soybean based protein to go (most of it goes to pigs and chickens). Which is surprising because soybeans are way up in the past month (people hoping for tariff relief). Other shoe waiting to drop, lol.
- im3w1l 7y agoWould you mind explaining how tariffs interact with futures prices? Naively I would think that tariff relief -> more and cheaper imports -> lower price. What am I missing?
- dhsuywej 7y agoThink of farmers in this instance as refineries that use soybean feed to convert Piglettes into Pork-Pigs. Tariff relief on USA brand soybean feed means that Chinese Piglette refineries will probably demand more of the USA brand feed than before because of the now lower price relative to other feed brands. However, at the same time, the refineries are experiencing a shortage of Piglette to mix with the imported soybean feed due to ASF and so they simply have lower feed needs/demands than before. You could make it more complicated by adding nuance like whether this will drive an increase in demand for imported pork as well which could, over time, stimulate USA/Worldwide feed demand as non-Chinese Piglette refineries expand and compete to fill the heightened demand for foreign pork (assuming things play out this way) but the overall gist is simply that there's pressure in two directions but probably not equal pressure.
- thaumasiotes 7y ago> You could make it more complicated by adding nuance like whether this will drive an increase in demand for imported pork as well which could, over time, stimulate USA/Worldwide feed demand as non-Chinese Piglette refineries expand What I find most interesting about this is that by importing pork, hypothetical China effectively imports the same quantity of American soybeans, but without paying the soybean tariff.
- jddj 7y agoSure, but much further along in the value chain. They'd much rather be importing cobalt (soybeans) and exporting iPhones (pork).
- im3w1l 7y agoOh it's a tariff on soy exports, not imports. That explains it.
- xwowsersx 7y agoCounterpoint would be that production of other proteins (beef and chicken) would increase to make up for the lost production of pork, but the arguments against that are 1. Have to look at how much feed those require vs pigs (clearly chickens require way less) and 2. Pork is a cultural thing in China. There's some substitution, but to an extent they will simply eat less protein in absolute terms. These were the kinds of things we thought a lot about. Had to think through this very carefully.
- konschubert 7y agoWhy do you call „meat“ „protein“?
- xwowsersx 7y agoJust habit. Beef, chicken and pork are collectively referred to as "proteins" within the investment community/people who follow Ag and Food companies.
- egdod 7y agoThat’s pretty common shorthand. For example, lots of people wouldn’t include fish as “meat” but would include it as a protein.
- deleted 7y ago[deleted]