As you sow…

[Galations, 6:7]

As 25% tariffs were imposed on US pork exports to China, hog futures continued the downward decline.


Source: ino.com.

In longer term perspective, prices have been trending down, with futures for June 2018 now lower than spot prices at the end of 2016:


Figure 1: Pork prices (net farm value, cents per pound) (blue), 2 April futures for June (blue square) (2017M01 cents per pound) (red). Real is CPI-all deflated. Source: USDA, BLS, INO, and author’s calculations.

Pork exports are about a $6.5 billion a year; about $1.08 billion went to China/HK in 2017. Repercussions will be geographically concentrated.

Source: USDA.

Tyson’s a large processer of pork, experienced pressure today.


Source: Google finance.

The measures imposed on pork were in response to Section 232 sanctions. Much larger tariffs are likely in response to the Section 301 sanctions announced by Mr. Trump, covering $50-$60 billion of imports. Soybeans, constituting $14 billion of US exports to China, are a possible target. The geographic concentration of soybean production implies concentrated economic pain from retaliation.


Source: USDA.

Some folks wanted a trade war. Some will get to experience it now.

55 thoughts on “As you sow…”

  1. PeakTrader

    We’re fortunate, Trump has the guts to put an end to Communist China’s bad behavior in trade – the U.S. will benefit tremendously longer term.

    “Senate Minority Leader Chuck Schumer — “Intellectual property is the lifeblood of emerging industries and the good paying jobs they provide. The American advantage of intellectual property is one of the main things that will keep us number one economically in this century. But not if we allow it to be stolen and taken advantage of. And the country that does that more than any other is China.””

    1. baffling

      this is the same trump who uses his position to terrorize us companies? his assault on amazon is certainly not democratic, and probably falls in line with your understanding of communist china behavior. so we have government trying to choose winners and losers in business? keep up the support comrade peak. i suppose amazon also should not use the rules as written to minimize their tax bill? that was something only comrade trump was allowed to do, right? peak trader appears to be more of a russian troll than i even imagined.

      1. PeakTrader

        Baffling, what does your nonsense statement have to do with my comment about unfair trade? What a political hack. You’re the one who has supported Chinese and Russian misbehavior, along with government picking winners and losers. What a hypocrite and a joke – it’s laughable. Trump is pro-business and pro-American.

        And, the post office loses money, which you supported for your crony-capitalist friends:

        https://ir.citi.com/XInLvxkr5F%2FJvyPr1NMl%2FPcIgrn%2BXqplW8cqbv2ImZxLKrWAiRT%2BcFMjQe6C%2BuQT9n1mvCnznGU%3D

        1. pgl

          Actually they do. Amazon wants to be a monopolist. Do you know nothing? I guess so.

          The Post Office is receiving a price from Amazon that exceeds its variable costs. Trump is confusing average fixed costs. If you ever opened a Principles of Economics text you would get this,

          Seriously Peaky – you really need to stop demonstrating your total ignorance.

          1. PeakTrader

            Pgl, so, you disagree with my statement the Post Office loses money – The Post Office has lost money for 11 consecutive years.

            And, why don’t you explain to Trump how to make billions of dollars, since you believe he’s “confused.”

            Your calling is government accounting, e.g. ignoring the Post Office’s $121 billion of unfunded liabilities – another real Pgl demonstration of total ignorance, along with another round of fake news.

          2. baffling

            “Pgl, so, you disagree with my statement the Post Office loses money – The Post Office has lost money for 11 consecutive years.”

            i would call trying to blame the post office failure on amazon as political hackery.

      2. PeakTrader

        Baffling, you’ve terrorized taxpayers and huge segments of the U.S. economy. You supported assaults on half the voters in the country. Trump isn’t stopping your boy Bezos from using Fed-Ex or UPS. And, I don’t blame Trump for protecting taxpayers, while also taking a swipe at Bezos’s Washington Post, which is over 90% negative on Trump and creates lots of fake anti-Trump news. Goebbels would be proud of your propaganda.

        2. baffling

          peak, trump avoids paying taxes and you claim he is a superior businessman. if amazon does the same, they are crony capitalists in bed with the communists? fascinating. hypocritical and political hackery at its finest. and trump continues to make political attacks against those who disagree with him-with threats of using government power to silence or damage those folks. but you support that as a free democratic society? seriously? you seem to support the approach of throwing ones political enemies in jail in order to eliminate the competition. sounds like a banana republic comrade peak trader.

          and lets be clear comrade peak, i was not the one who assaulted the financial free world with my financial shenanigans which resulted in the financial crisis, and then tried to blame the government for such poor behavior. that was you comrade peak. you have a lack of integrity which is astounding, even in a world where trump exists.

          “You’re the one who has supported Chinese and Russian misbehavior, along with government picking winners and losers.”
          seriously, you don’t think trump is picking winners and losers in the business world with his vile twitter tantrums? i guess being a russian troll, you would never admit to your support of the russians influencing the elections and trump. but we will let mueller clear up those items in due time, comrade peak.

          1. PeakTrader

            Baffling, I’m not one of your comrades.

            Your pathetic attempts to fool people with your nonsense will be very limited.

          2. baffling

            Peaky, why is trump gaming the tax system a smart businessman, but amazon gaming the tax system unpatriotic? You are either a Russian troll, or simply an unwitting fool who trolls for the Russians for free. Either way, comrade peak, your comments expose the hypocrisy you espouse daily on this blog. I simply try to point it out, so that those new to the blog understand most of what you say is simply political hackery brought to them by a wannabe junior phd in economics who contributed to the financial crisis of a decade ago.

          3. PeakTrader

            Baffling, one wants to change the system and the other wants to take advantage of it.

            You’ve supported destructive government policies and get too much propaganda.

            Anyone will quickly realize you’re a rigid ideologue and a waste of time.

          5. baffling

            “Baffling, one wants to change the system and the other wants to take advantage of it.”
            and its comments like these which illustrate you as a political hack, peaky.

            once again, two entities try their best to avoid paying taxes, legally. but if one entity is trump, peaky hails him as a patriot. and if the other entity is amazon, peaky argues for tax abuse and corporate welfare. well done stooge.

            it is interesting how peak and trump want to attack amazon for the failures of the post office. the post office loses money, but it is amazons fault? seems to fall along the same lines as the corrupt bankers who created the financial crisis-but it was not really their fault. in that case, the government made them do it!

            the trump argument against amazon has nothing to do with amazon itself-and trump could care less. trump is using this as a proxy fight against bezos and the washington post. he is using the government bully pulpit to go after people and businesses that disagree with him-very patriotic and democratic. and peaktrader is too stupid to understand what is happening-hence he falls for the amazon clap trap argument. so we continue to get ideological drivel from peak about the post office and amazon-when the story is really about a government strongman imposing his will on what once was a democratic society. well done peak loser.

    2. pgl

      Not having monopolist privileges for the rich is Communism? Lord – you are really an idiot.

      1. PeakTrader

        Pgl, you’re too dumb to know you’re the idiot.

        The Post Office makes a profit on its letter mail services monopoly.

        It loses money on package deliveries, which are competitive.

        1. 2slugbaits

          PeakTrader Are you sure about this? The financial statement from the USPS suggests it’s the first class mail operation that is losing money, not package deliveries.

          https://about.usps.com/news/national-releases/2017/pr17_069.htm

          And there’s nothing preventing the USPS from increasing its rates for high volume customers like Amazon. If you’re really worried about USPS costs, then maybe the USPS should increase rates for home deliveries of first class mail, which is very expensive. No way that rural free delivery makes any economic sense. It’s strictly a sop for the rural Trump base.

          Also, Trump doesn’t produce anything. He’s simply a rent seeker, pure and simple. Although I don’t believe you actually did study any economics, if by chance you’re telling the truth and you really did, then I suggest you either reread some of those old econ books or buy new ones that are more up to date.

          1. baffling

            2slugs, don’t expect peak to try and understand the issues with the postal service. He is simply on the conservative talking point of the day, driven by conservative pundits and the complainer in chief, that amazon is bad and we can use the post office as an excuse to attack amazon. Amazingly, trump could actually care less about how amazon is gaming the system. This is simply trump’s excuse to attack a political enemy-bezos. Amazon is simply the punching bag. Peaktrader is too stupid to understand this.

  3. pgl

    “In longer term perspective, prices have been trending down, with futures for June 2018 now lower than spot prices at the end of 2016”

    So bacon is cheaper which will make Chris Christie happy. Making America Fatter Again!

    1. Moses Herzog

      Made me laugh. But Christie is the type that likes to snort and hike his pants to tell everyone how much he spent for his lunch. Cheap bacon is not going to give him the status symbol that convinces him he’s not a sorry narcissistic sack of sh*t. Say that last part 3 times fast, I dare yeh.

  4. Moses Herzog

    Menzie, I been reading those 3 papers you put up. Now 1/3 thru Jackson Hole paper. I have at least 2 questions so far, but I’m trying to make through all the paper before I run down my questions for you. Sometimes I teeter-totter on some issues. But on trade lately, I been thinking America could do better by focusing on current accounts and structural issues related thereto. Mainly talking savings and investment here. I also think funding things with government bonds is going to get “hairy” for America some time in the future. There seems to be this assumption by the public (and even mainstream, respected economists) that there is an endless appetite for US issued bonds, and I just don’t see it. I think that eventually breaks the same way mortgage backed securities did 10–11 years ago.

    1. Ed Hanson

      pgl

      As you know, but perhaps some don’t, the lead up to and the extraordinary price in 2014 was caused by the PED Virus epidemic which was a tragic and heartbreaking disease that damaged many a hog producer.

      And the price is not just back to 2000 levels but also the period from 2003 to 2010. And further looking at your excellent chart, demonstrates that an unbiased observer who knew nothing of the current news could discern no changes in the price trend and volatility for the last 3 years. Whether the trend and volatility will show change is far in the future.

      Edd

    2. Moses Herzog

      @ pgi
      I’m glad you put this link up. You know I’ve never (during subscribing or not subscribing, either way) had a problem accessing Bloomberg data on markets. I mean the part on the site with the orange background and a ton of indexes and commodity prices listed. Last night the information was blocked and it told me in bold letters it was “premium content”. I think Bloomberg is going to find traffic dwindling if they keep that cr*p up. If and until BusinessInsider pulls the same stunt, it appears I will be traveling there more often now.

        1. Moses Herzog

          @ pgi
          I honestly can’t tell if you’re joking or not. I actually like Bloomberg Magazine/site overall, at least up to the time they got their new editor (I think around November??) I subscribed to the “old school” hardcopy for 4+ years until this last December. I even like Michael Bloomberg—had he ran for President in 2016, he genuinely would have been in my top 2 choices, together with Bernie. But I don’t like it when sites try to bully you into a subscription by denying links, especially when said data on link is largely publicly accessible.

  7. ilsm

    Lived in central Indiana years ago, you knew you were coming up on an industrial pig operation about a mile out…. the methane production!

    A neighbor owned one you always knew where his work boots were!

    China has taken a large number of SOWs “out of production”.

    When one door closes……

    1. Moses Herzog

      Gosh Bruce, aren’t you worried about the “job creators” in the pork and soybean industry (among others)?? If American producers suffer “then they can’t create jobs” and “trickle down” (remember, jostle the love gun a little to get the last drop off) on the white trash. You’re diverging from the FOX/Republican/Reagan/Trump script.

      1. Bruce Hall

        m,

        Not too worried about farmers who can alternate crops. My brother’s brother-in-law is a Michigan farmer who raises soybeans… when he is not raising corn or alfalfa or hay or wheat. He can sell the crops as feedstock for dairy cows, cattle, pigs, or commercially to food processors.

        Farmers are used to boom-bust cycles for commodities and the good ones have contingency plans. http://www.farmfutures.com/story-weekly-wheat-review-0-30768 Besides, the soybean market was saturated before the tariff tiffs, so farmers have been forewarned. https://www.farmcrediteast.com/knowledge-exchange/Blog/todays-harvest/2018-ag-outlook . Brazil had already become the largest exporter of soybeans to China and its share has been growing.

        That said, the end result of soybean prices falling somewhat should lower the costs of other food products or meat where soy is part of the production chain.

        As to the “witty” comments you added at the end… I only find them half-witty.

  9. noneconomist

    These tariffs will definitely make it harder (and more expensive) for pigs to fly. Off shelves. In China. (Sorry, couldn’t resist)

    3. Moses Herzog

      One thing I love about this blog: Unlike many of his commenters—Menzie never mucks around in the pig slop. I say pig slop….. Nevermind

  10. dilbert dogbert

    That map of hog and pig sales tells me where not to live. I went to an ag engineering school and the dorms were downwind of the pigs. After the first rains the dorms were unlivable. All of the animal pens were upwind.

    1. Ed Hanson

      d dog

      It would have done you good at that young age to realize which was the more important population.

      Ed

    2. pgl

      I used to take I-5 from LA to San Fran. I forget the place but when we drove by the rows and rows of pigs, it was windows up, air conditioner full blast, and still we suffered for a while.

  11. [anonymous]

    Why don’t you write a post about China’s US T-bills ?

    @Amazon/Trump : Bezos owns the Washington Post since 2013 via his Nash Holdings,
    you know the WP left-wing bias well. What’s surprising here for you ?

      1. pgl

        Here is a Trumpian thought – jack up interest rates which will lower the market value of the U.S. government bonds China holds. OK, this will kill the US economy but war is war!

      2. Moses Herzog

        @ Menzie
        I would say in the last 2 weeks or so Alex Jones and the nutjob contingent have been “doing double-time” pounding on Amazon, because Trump thinks the way to get at Washington Post for doing their journalistic duties is by attacking WaPo indirectly through Amazon.
        https://www.nytimes.com/2018/03/29/us/politics/trump-amazon-taxes.html

        NYT also shows many of the fallacies of this argument, some of which used to be true, but no longer hold as current fact:
         https://www.nytimes.com/2018/03/29/us/politics/trump-amazon-post-office-fact-check.html

        As far as “anonymous” commenter’s alluding to US T-bills, it’s really hard to make wild guesses on the thought processes of a non-educated loon. But my best wild guess would be the ZeroHedge (and other wacko sites’) trope that China could “dump” its U.S. Treasury holdings at “any moment” and cause “mass hysteria” in the markets—- which Menzie, you and I both know, is not in the foreseeable future. Though I hope not to be putting words in your mouth on that last part.

      3. [anonymous]

        Does China partly ‘own’ the US via T-bills, as some wacko sites [cit. Moses] claim ? Or does China has some kind of leverage due to its holding, how will they use that leverage ? Menzie, be courageous, tell us about your thoughts. Analyzing the past is great, look at McBride’s work, but you are supposed to write about the future too.

        @Moses : behave properly.

  12. Not Trampis

    unfair trade is a term used by lefists who clearly do not understand how trade works.

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