Trade beef a threat to pork exports
US consumers are snapping up plentiful cheap pork, but the nation’s farmers are worried that trade disputes with export markets in China, Mexico and Canada could hit a lucrative part of their pork business.
The domestic demand outlook remains bright thanks to the strong US economy, upcoming spring grilling season and Easter holiday ham purchases. US goods in general are attractive to foreign buyers thanks to the recent drop in the dollar.
However, trade disputes with China and slow progress in North American Free Trade Agreement (Nafta) talks have clouded prospects for US pork exports, which are crucial for the industry, as roughly one quarter of pork produced in the country is exported.
The US Meat Export Federation said US pork exports were growing at a record pace, with volumes from January to November 2017 of 2.23-million tonnes, worth $5.9bn.
That was up from 2.09-million tonnes, worth $5.4bn, for the same period in 2016, according to the industry group.
“Without a doubt, our biggest concern is the trade situation,” said Steve Meyer, a Kerns and Associates economist who is also a National Pork Producers Council consultant.
President Donald Trump’s decision to slap stiff tariffs on US imports of Chinese solar panels and washing machines has sparked fear among pork producers of possible retribution from China, the world’s largest consumer of pig meat and the US pork sector’s third-largest export market.
China trade was always risky, Meyer said, and “the deal over washing machines and solar panels didn’t help”.
China is a growing market for US pork, but pork musclecut exports trended lower in 2017 as China’s domestic pork production increased, the Meat Export Federation pointed out.
“We live in an interconnected world. And when you put your thumb in someone’s eye, they’re likely try to jab back and put their thumb in your eye,” said Linn Group analyst John Ginzel.
Separately, contentious Nafta modernisation discussions are drawing more attention as the US spars with Mexico and Canada, the top- and fourthranked destinations for US pork by volume.
Progress has been slow after several rounds of talks, and concerns remain that the US could withdraw from the agreement.
Cancelling the agreement could threaten hog farmers’ profits, which have been strong, thanks to low-cost feed and strong demand throughout 2017. Those factors also enhanced the bottom lines for packers such as Tyson Foods.
“The hog industry is really strong because everything is lining up right now,” explained hog farmer Greg Boerboom of Marshall, Minnesota.
Farmers had cut input costs by using nutrients from pig manure on crops instead of commercial fertiliser, Boerboom said in an interview.
As of December 1, there were 73.2-million hogs on US farms, the most since 1943, according to the US department of agriculture. Packers produced a record 11.6-billion kilograms of pork, according to independent industry analyst Bob Brown and the Livestock Marketing Information Centre’s Jim Robb.
Boerboom said potentially losing Nafta was a bigger threat to his livelihood than disputes with China, because Mexico and Canada shared common borders and had been viable markets for the US.
“You want to keep the customers you have before you start worrying about new ones. So, I really think about Mexico, Canada and even Japan and South Korea more than I do China,” he said.