What would you do with $2 trillion?

January’s issue of Whole Hog Brief covers a range of subjects including: German hog numbers, exchange rate changes, weakening pig prices in the EU, North America and China, and the faltering export performance of US and Canadian packers but there is one issue that I want to highlight here – and it is one that will have an effect on world economic growth and the direction of the global pig price this year. I am talking about the impact of the fall in oil prices.

This  unexpected reduction in energy costs will clearly help intensive livestock producers and will go a little way to offsetting the decline in their output prices (although the fall in feed costs will be more helpful). But what about consumers? What will this oil price windfall do for them?

A back of the envelope calculation suggests that the fall in oil prices will deliver an estimated extra $9 billion each day into global consumers’ wallets as fuel and related consumer expenditures are reduced. This is equivalent to a $2 trillion tax cut for consumers in 2015 and much of it will be concentrated in the developed economies in the northern latitudes (where the squeeze on consumer incomes has probably been most severe). We can expect that some of this extra spending will be seen in the food service sector and in meat-related consumption. But wherever it is spent, it must certainly stimulate global economic growth. Since consumers will probably hold the key to the direction of the global pig price cycle in 2015 this must be good news.