U.S. pork featured at Costco in Mexico City National Pork Board

Obstacles in China, Mexico putting pressure on pork export value

One of the most urgent takeaways from the September report Halstrom says is making sure the U.S. is on an equal playing field for market access.

While September pork exports were down just 2% from a year ago to 179,423 metric tons, the president and CEO of the U.S. Meat Export Federation says the real issue at heart is on the value side.

“While the volume hung in there very well, the value is lower, primarily into Mexico and the Hong Kong, China region, and those of course are duty related,” Dan Halstrom says.

According to data released by the USDA and compiled by USMEF, global pork export value fell 7% to $470.2 million. Pork muscle cuts were 2% higher than a year ago at 146,542 mt, but value still declined 3% to $397.6 million. September variety meat exports dropped significantly in both volume (32,881 mt, down 18%) and value ($72.6 million, down 21%). For January through September, combined pork and pork variety meat exports were 1% above last year’s record pace at 1.81 million mt and 2% higher in value at $4.79 billion. For pork muscle cuts only, exports increased 6% from a year ago in volume (1.46 million mt), valued at just under $4 billion (up 3%).

Meanwhile, U.S. beef exports cooled from the record results posted in August but were still significantly higher year-over-year. September beef exports totaled 110,160 mt, up 6% from a year ago, valued at $687.1 million — up 11%. For January through September, beef exports were just over 1 million mt, up 9% from a year ago, while value surged 18% to $6.2 billion. For beef muscle cuts only, the year-over-year increases were even more impressive, jumping 13% in volume (777,740 mt) and 20% in value ($5.54 billion).

September exports accounted for 24.8% of total pork production, up from 23.6% a year ago. For muscle cuts only, the percentage exported was 21.8% — up two full percentage points from last September. For January through September, pork exports accounted for 26.1% of total production, down from 26.5% last year, but the percentage of muscle cuts exported increased from 22.1 to 22.7%. Export value per head slaughtered was down 1% from a year ago in September ($48.72) and for January through September ($52.46).

Mexico and China
One of the most urgent takeaways from the September report Halstrom says is making sure the United States is on an equal playing field for market access.

“I do believe that we continue to have opportunities in making sure that we work with our government to stay on equal footing, an equal playing field in terms of market access,” says Halstrom. “We have some obvious issues here that need to be dealt with, the first one being Mexico.”

While NAFTA 2.0 was an important step forward, Halstrom says it’s only the first step. The U.S. pork industry is still dealing with 20% retaliatory duties for product going into Mexico.

Despite a fourth straight month in which shipments were below last year’s level, exports to leading volume market Mexico remained 1% ahead of last year’s record pace at 589,235 mt. Export value, however, has felt intense pressure from Mexico’s retaliatory duties, dropping 8% to $1.01 billion. Canada’s January-September exports to Mexico were up 20% to 93,346 mt (valued at $126.5 million, up 25%). EU exports also surged to Mexico in July (1,809 mt, up 747% and August (2,343 mt, up 733%) and are expected to continue gaining momentum as Spain, Denmark and Germany take advantage of Mexico’s recently implemented duty-free pork quota.

In terms of China, the decline in pork imports was what was expected from the beginning of the year because of their imperious production, says Joel Haggard, USMEF senior vice president, Asia Pacific.

Exports to China/Hong Kong declined 26% from a year ago to 277,779 mt, with value dropping 14% to $667.9 million. This region is the largest destination for U.S. pork variety meat exports, which were down 27% in volume (177,747 mt) and 13% in value ($466.2 million).

“From an accounting angle, the pork side was pretty flat, but basically that is the result of our exports to China and Hong Kong dropping by roughly 100,000 tons and that getting picked up in terms of increased buying by Korea, Columbia, Australia, Philippines, Vietnam, Taiwan,  all adding up to more or less compensate for that huge decrease in China pork imports,” Haggard says.

China also looks to get more interesting because of their African swine fever outbreaks, Haggard says. As of Monday morning, the country had 54 cases. Transport restrictions are also causing some market dislocations and some panic selling in some provinces.

“There’s a degree of normalcy in the market so far. National prices are still above break-even but seem to be kind of see-sawing back and forth and the market itself is trying to find a direction,” Haggard says. “Overall it would look like they are going to have a production contraction because of this disease.”

Japan
Now with the Trans Pacific Partnership going into effect at the end of the year, Halstrom says urgency also needs to placed on the U.S.-Japan agreement, as U.S. competitors’ duties will start to drop even further.

Exports to Japan increased 2% year-over-year in both volume (295,346 mt) and value ($1.22 billion). This included a 2% decrease in chilled pork volume (155,395 mt) while value held steady at $750 million. U.S. share of Japan’s total imports has held relatively steady this year at 35%, but with CPTPP set to enter into force Dec. 30 and with the Japan-EU Economic Partnership Agreement also on track to be implemented in the coming months, U.S. pork will soon face significant tariff disadvantages in its leading value market.

“The longer we sit here without an agreement, the less competitive we are going to be,” Halstrom says.

New markets
Halstrom says the September report underscores the need for both U.S. meats to diversify markets.

“Our mainstay markets continue to be very, very important — Japan, Mexico, Korea, Hong Kong, China — but we are starting to see developing regions emerge more and more every month,” says Halstrom.

Markets such as Columbia, Peru, Guatemala, South Africa and Angola are just to name a few examples where there may be opportunities for both U.S. pork and beef. Halstrom says these regions are all exhibiting an increasing per capita consumption and a rising middle class.

Africa is another market that has been on USMEF’s radar since 2013.

“We’ve been very active in the region, especially West Africa and South Africa,” says Halstrom. “You have a billion plus people on the continent and the youngest demographic in the world, so I don’t think there is any doubt that this region will continue to emerge each year as we go.”

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