Pigs

Wholesale prices were at the lowest for this time of year in a decade. That’s thanks to a huge expansion in the American hog herd, which just hit its highest mark since 1943.

Meanwhile, the U.S.-China trade spat had kept a lot of that meat at home. So it’s probably no surprise that consumption of pork in the U.S. is up about 4% so far in 2019.

Hog futures in June capped their biggest monthly loss in almost a year, leaving investors fleeing the market amid the glut. And China banned meat imports from Canada after finding forged health certificates. That could leave North America swamped with even more excess protein.

Not only are there a lot of pigs in the U.S., they’re also getting fatter as they feast on relatively cheap feed. While spring rains delayed corn plantings and sparked a recent rebound for the grain, prices are still down about 50% from a record in 2012. The average hog weight is almost 214 pounds, about 4 pounds more than the 10-year average.

“We have too many hogs,” said Don Roose, president of U.S. Commodities in West Des Moines, Iowa. “With lower corn prices, maybe we keep the weights higher, maybe we keep the expansion in place.”

Investors are betting that might be the case and are dumping their bullish wagers.

In the week ended June 25, investors held a hog net-long position of 33,207 futures and options, U.S. Commodity Futures Trading Commission data showed. The figure, which measures the difference between bets on a price increase and wagers on a decline, has dropped for five straight weeks to a three-month low. Long only holdings are down 13% from a peak in April.

Cuts across the pork world have fallen. Prices for wholesale ribs are at the lowest in years, and ham is down about 25% since a peak in June.

To be sure, costs at the grocery store can sometimes lag moves in the wholesale market. But the latest government data shows some prices at the retail level are also relatively low. Pork chops as of May 31 were down about 16% from five years ago.

Consumers may want to snap up the cheap pork while they still can. The reason the American hog herd got so big is that producers are expecting an eventual demand boom from China, where the spread of African swine fever is shrinking pork production.

The deadly pig disease will probably mean a 30% cut in the Asian nation’s potential output over the next year or two, according to Banco BTG Pactual SA.