Hog in­dus­try world­wide get­ting slaugh­tered in trade war

Stabroek News Sunday - - CLASSIFIEDS/NEWS -

BEIJING/CHICAGO/C ARAMBEI, Brazil, (Reuters) - Ken Maschhoff, chair­man of the largest U.S. fam­i­ly­owned pork pro­ducer, has watched prof­its fall as trade ten­sions rise be­tween the United States and China.

His com­pany, The Maschhoffs, has halted U.S. projects worth up to $30 mil­lion and may move some op­er­a­tions overseas. In­vest­ing in do­mes­tic op­er­a­tions now would be “lu­di­crous” as China and oth­ers re­tal­i­ate against U.S. agri­cul­tural goods, Maschhoff said from the firm’s Car­lyle, Illi­nois head­quar­ters.

Across the globe, Chi­nese pig farmer Xie Yingqiang sent most of his 1,000-pig herd to slaugh­ter in May to limit losses af­ter Chi­nese tariffs on U.S. soy­beans hiked feed prices and left him un­able to cover his costs.

“It did not re­ally make sense to keep rais­ing them,” said Xie, from eastern Jiangsu prov­ince.

The du­elling salvos of the U.S.-China trade war are land­ing par­tic­u­larly hard on the pork in­dus­tries of both na­tions – and spray­ing shrap­nel that has dam­aged other ma­jor pork ex­porters such as Brazil, Canada and top Euro­pean pro­duc­ers. In con­trast to many in­dus­tries that trade war has di­vided into win­ners and losers, the world’s pork farm­ers and pro­ces­sors are al­most uni­ver­sally shed­ding prof­its and jobs from a crip­pling com­bi­na­tion of ris­ing feed costs and sink­ing pig prices.

The key rea­son: The trade war came at pre­cisely the wrong time, af­ter a world­wide ex­pan­sion to record pork pro­duc­tion lev­els on the ex­pec­ta­tion of ris­ing meat de­mand and low feed prices from a global grains glut.

In the United States, meat com­pa­nies such as Seaboard Tri­umph Foods and Prestage Farms have spent hun­dreds of mil­lions of dol­lars boost­ing U.S. slaugh­ter ca­pac­ity by more than 10 per­cent from three years ago to nearly half a mil­lion hogs daily.

Just be­fore trade bar­ri­ers went up, the U.S. Depart­ment of Agri­cul­ture (USDA) pre­dicted in an April anal­y­sis that global sup­ply growth would out­pace de­mand this year, spark­ing “fierce com­pe­ti­tion and lower prices.” Tar­iff bat­tles ac­cel­er­ated those trends by shut­ting off ex­port mar­kets, rais­ing feed prices and up­end­ing re­gional sup­ply-and­de­mand dy­nam­ics that un­der­pinned in­dus­try prof­its.

“As this trade war has heated up, it’s made the trade with China very dif­fi­cult - to even stop­ping at var­i­ous points - be­cause the tar­iff that’s been im­posed makes it not vi­able,” Ken­neth Sul­li­van, chief ex­ec­u­tive of Smith­field Foods, the world’s largest pork pro­ducer and a di­vi­sion of China’s WH Group, told Reuters in an in­ter­view Fri­day.

“We’re keenly in­ter­ested in the U.S. and China get­ting it re­solved,” Sul­li­van said, adding that ex­pan­sion of the U.S. pork in­dus­try had also hurt prof­itabil­ity. “Cer­tainly U.S. agri­cul­ture has a lot at stake, and China, to the ex­tent that they’re on the sur­plus end of the deficit, has you can ar­gue more at stake.”

U.S. pork faces re­tal­ia­tory du­ties of 62 per­cent in China and up to 20 per­cent in Mex­ico, slash­ing de­mand from two top U.S. pork ex­port mar­kets and con­tribut­ing to a moun­tain of un­sold meat in cold stor­age.

The White House did not re­spond to re­quests for com­ment.

The USDA said in a state­ment that pork pro­duc­ers soymeal costs have de­clined be­cause of a sur­plus of do­mes­tic soy­beans that China is no longer buy­ing. The Trump ad­min­is­tra­tion is work­ing to in­crease op­por­tu­ni­ties for U.S. agri­cul­ture with the Euro­pean Union, Ja­pan and the United King­dom, the agency said.

In China, tariffs on U.S. soy­beans and an out­break of African swine flu have driven farm­ers to send hogs for an early slaugh­ter, ex­ac­er­bat­ing a glut that fol­lowed the rapid ex­pan­sion of more ef­fi­cient, large-scale farms in re­cent years.

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