March 2019 Ags Update

African Swine Fever and the Hog Market


  • As the world’s largest pork-producer, China accounts for almost half (48%) of world pork production. (USDA)
  • The total U.S.’s hog herd size is 74.6M head; 6.3M for breeding and 68.2M in market hog inventory. (USDA-NASS), with China’s herd size estimated at 433M head.
  • Widespread outbreaks of African Swine Fever (ASF) have been confirmed and are currently present in domestic and feral hog herds in Russia and 28 provinces in China.
  • Few consequences concerning China are confirmed, but it is estimated that China has destroyed or slaughtered 16-20% of their domestic herd – nearly equivalent to the entire U.S. supply.
  • Other affected areas with confirmed cases within hog populations are Belgium, Eastern Europe, and Vietnam.
  • Australia confirmed the virus is present in pork product imports smuggled from China in January 2019.
  • In January, the latest information from China’s Ministry of Agriculture indicates the Chinese sow herd declined by 1.36 million sows in the past month.

CME Lean Hog futures volatility has been mostly range-bound between 10-40% for the past five years. That changed last year in the summer at the beginning of the trade war when we saw volatility spike higher to just under 60%. So far in 2019, volatility has been very low. With events such as Chinese tariff implementation and a potential ASF outbreak on the horizon, there is potential for additional periods of heightened volatility in hogs this year.


Use the Commitment of Traders Report Tool to gain insight into open interest holders, trade flow, and more.

Source: CME Group and QuikStrike

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Whitepaper: Trade War, Tensions and Tariffs

In the last few days, the U.S. and China confirmed a general agreement that China will purchase an annualized $50 billion of ag products. This represents an additional $30 billion than previously committed. It was also indicated that this would include another 10 MMT of soybeans in addition the 10 MMT already secured and likely corn purchases as well. Broader details of total purchases are expected soon.

Learn more about the effects of the Trade War on Agricultural markets here.

February Highlights

  • Record KC Wheat Options Open Interest on 2/21/2019 of 107,128
  • 2nd highest volume day in Chicago Wheat Options on 2/20/2019 of 112,738
  • 10 record Open Interest Days in Nonfat Dry Milk Options – ending with 25,039 on 2/26/19

Black Sea Highlights

  • BWF has traded over 14K since start of 2019, up 97% over same period last year
  • BWF trading mostly in new crop (July 19 onwards). OI in new crop months of 7.2K
  • BCF has traded over 8.4K since start of 2019 (600 lots same period last year). Total OI of 6.8K, out to new crop Dec 19
  • Over 2K Black Sea Wheat options traded since start of the year
  • Bids/offers and 1,032 lots of trades on Globex in February. Globex populated by market participants along the curve

Options Update

  • Weekly Options set an all-time monthly ADV record of 8,862 contracts
  • Corn Options volume showed a large increase YoY for the month of February
  • Lean Hog Options print the fifth highest volume day on Feb 20 with 31,000 contracts

➜ Monthly Report

Callout Corner

  • A near-record 450,000 tons of CME fertilizer swaps & futures were cleared during the month of January
  • CME will be hosting a lumber contract delivery discussion in Montreal around the Montreal Wood Convention on March 19th

Dairy Complex - Average Daily Volume

  • Notably, that growth was driven by Dry Whey, NFDM, and Class IV Milk; not the largest products
  • All-time records in NFDM Futures and Options volume sent open interest soaring to new records
  • NFDM futures YTD are up 36%, while options are up 126%