Windfall for US pork producers shows one man's crisis is another's opportunity
There are more than 60,000 large and small pork farmers in the United States, according to Successful Farming, an industry trade publication. These farmers have an output of about $23.4bn a year and supply about 2.2m metric tons of pork products to customers outside of the US. It could be more.
Unfortunately, it’s been a frustrating couple of years for these farmers, mostly due to the Trump administration’s tariffs that have hindered sales to their largest external customer, China. But things are about to change, and these same pork farmers who have been held back are now about to profit. Big time.
That’s because many are expecting that the “phase one” part of the administration’s new trade deal with China will lift the high tariffs on pork products sold from the US which will in turn make the price of American pork products more attractive – and more competitive – than ever. And the agreement could not have come at a better time.
The Chinese pork industry has recently become the victim of an unchecked spread of African swine fever which has devastated its pork supplies by as much as half, according to some estimates. The result of this misfortune has been rising prices amid a serious shortage of supply.
So much so that Chinese officials are increasingly worried that the lack of meat – a staple among many of its citizens – could cause food shortages. Countries that rely on pork purchases
from China are also concerned. “The epidemic could have broad and deep economic impacts at the global level,” Boubaker Ben Belhassen, the director of trade and markets at the United Nations’ Food and Agriculture Organization in Rome told the New York Times. “We don’t think there’s enough pork in the world to offset China’s shortfall.”
You would think that this potential worldwide supply shortage would be a huge opportunity for American pork producers. It is. But with the Trump administration’s ongoing trade disputes, many in the industry have been losing sales to cheaper competitors elsewhere in South America and Europe.
Not that things have been that bad for pork farmers in the US. Even in the midst of the higher tariffs brought about by the US-China trade dispute, sales of pork to China and Hong Kong have soared 47% this past year, according to Reuters. But the potential trade compromise is expected to bring about even more sales. “China has already taken a lot of product,” said Steve Meyer, economist for Kerns and Associates. “They’re going to take more and more.”
The new “phase one” trade deal agreed by the US and China includes a commitment for the Chinese to increase their purchases of US farm products to $40bn over the next two years. Many are expecting these additional purchases to include a significant amount of pork, and that’s good news for American pork producers – particularly smaller farmers – who have been struggling to compete during the past few years.
While other small farmers have seen their businesses pushed to the brink of extinction as a result of the Trump administration’s tariffs, the US pork farming industry actually caught a lucky break during this period, thanks to the significant price jumps and supply shortages caused by the African swine flu outbreak in China. Now comes another break for the industry – a new trade deal that will allow US pork farmers to further increase their sales to a country desperate for their products.
Ultimately, the situation will resolve itself and China will recover. But the story is a reminder of how reliant our businesses are on factors beyond our control. And that one man’s crisis is another man’s opportunity – as long as governments don’t get in the way.