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Paragon Commentary

Futures File: Hogs, Coffee & NASDAQ

Sep 07, 2018

Swine Fever Heats up Hog Market

Hog prices exploded to a two-month high on Friday as markets assessed a new threat: an outbreak of African Swine Fever (ASF) in China. The highly contagious and fatal disease has been found on 18 farms across six provinces in China, the world’s largest hog producer and consumer. While the disease doesn’t affect humans, the impact could be monumental on the global food supply.

The United Nations issued a report that there is a “very real possibility that ASF could jump the border into other countries,” prompting an emergency response. Thus far, China has culled only 40,000 of its 400 million pigs, but further spread could result in greater losses.

While China is threatened with a pork shortage, the United States has an excess supply, but the ongoing tariff disputes between the two countries are likely to prevent direct Chinese imports of U.S. pork. However, expectations for stronger global demand for U.S. pork have helped to boost prices in recent days, pushing December lean hog futures near 57 cents per pound, a 30% increase over the last month.

 

Coffee Grinds Lower

Coffee prices are facing a bitter outlook, trading near a twelve-year low this week under 97 cents per pound. The market has been unable to catch a buzz due to overwhelming global supply and weak demand.

Brazil, the world’s largest coffee grower and exporter, is wrapping up a record-breaking harvest, bringing over 60 million bags (60 kilograms each) onto the market.

Unfortunately for Americans with a caffeine habit, most of the price of a morning cup of joe is independent of the underlying commodity cost, which means that there may be little savings at the grocery or local coffee shop.

 

Senate Hammers NASDAQ

The technology-heavy NASDAQ stock index futures dropped hard this week as major social media corporations testified on Capitol Hill. Executives from Facebook and Twitter appeared before a Senate committee and faced questions about election interference and political bias. After the sometimes-scathing interrogation by senators, the U.S. Justice Department announced it was probing whether social media networks are “intentionally stifling the free exchange of ideas.”

The threat of greater scrutiny and potential government regulation sent tech stocks tumbling, pulling the NASDAQ futures down sharply from the all-time highs it touched on Tuesday near 7700 points. By Friday morning, the market traded under 7400.

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