Hog industry worldwide getting slaughtered in trade war
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.