re:
fundamental news hogs china
https://www.wsj.com/articles/ravenous-china-could-spice-up-u-s-meat-stocks-11567156656
plummeting hog population is a tailwind for U.S. meat producer Tyson Foods, despite the trade war
A pork stall in Beijing. PHOTO: WU HONG/SHUTTERSTOCK
By
Nathaniel Taplin
Updated Aug. 30, 2019 5:20 am ET
The U.S. and China are in the midst of a trade war, and American meat products like pork are squarely in the crosshairs. Ultimately, though, that might matter less than the carnage in China’s own
hog population following an outbreak of African swine fever. U.S. meat heavyweight
Tyson Foods stands to benefit.
While investors have been unwaveringly
focused on rising trade tensions, many have yet to grasp the scale of the pig apocalypse across the Pacific and its implications for global markets. By July, the number of hogs in China—by far the world’s largest pork consumer—was close to a third lower than a year earlier, according to official statistics. And the situation may be even worse than headline figures imply: A June report from Reuters suggested that as many as half of China’s breeding pigs may have died or been slaughtered.
Pigs, OutHog population and pork prices in China,change from a year earlierSource: CEIC
%Pig populationConsumer price index: pork2010’12’14’16’18-50-250255075
Meaty-Go-RoundEven if China doesn't want U.S. meat, its risingdemand means the world needs U.S. productSource: CEIC
.billionChinese meat and offal importsU.S. meat and poultry exports2014’15’16’17’18’190.250.500.751.001.251.501.75$2.00
As a result, wholesale pork prices are skyrocketing—up roughly 60% on the year. The pork shortage is in turn pushing up prices of other animal proteins like beef, eggs and lamb.
For much of 2019, U.S. pork has faced Chinese tariffs upward of 50%. But the value of U.S. meat exports in aggregate was still up 8.3% on the year in June, the fastest growth since May 2018. The reason: The enormous pork shortage is sucking meat into China at an astonishing rate. Total meat imports in July were $1.7 billion, up close to 90% from the year before.
Most of this is coming from places other than the U.S. But the sheer scale of China’s jump in demand is pushing up overall U.S. meat exports, too, as non-U.S. producers
redirect cargoes to China to take advantage of the price increase.
Chinese pork stocks have benefited: Shares of
Muyuan Foods , China’s second largest hog producer, are up close to 40% since June. Other pork shares like
Wens Foodstuff have also skyrocketed since early 2019.
Global
meat stocks like Tyson Foods and
JBS have also been lifted by the epidemic but don’t look too pricey. U.S.-listed Tyson now fetches 13 times estimated earnings for the next 12 months, according to FactSet, compared with a five-year average of roughly 12 times. Even with Sino-U.S. trade tensions rising, the stock probably has further to run—especially if the Federal Reserve moves ahead with further rate cuts.
China is the world’s largest food consumer and needs foreign meat more than ever. The U.S., meanwhile, is a key global supplier no matter how you slice it. That is likely to trump trade tensions for Tyson in the second half of 2019.
Heard on the Street's Summertime Stock Picks Leaderboard
Had I just stayed calm and put in a limit order slightly below I would have gotten filled and be fine and up nicely for the day instead of being down.