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U.S. pork exports look to the east

Hoping for a repeat of last fall's big export numbers.

Exports of U.S. pork are on a record pace, accounting for just over 30% of total U.S. pork production, which is remarkable considering global competition and supply chain disruptions brought on by the COVID-19 pandemic.

According to statistics released by the USDA and compiled by the U.S. Meat Export Federation, U.S. pork exports were down from a year ago in July but increased compared to June. Through July, 3.914 billion pounds of U.S. pork and pork variety meat, valued at $4.598 billion, were exported worldwide.

With African swine fever still ravaging the Chinese swine herd, U.S. efforts are in play to help fill the protein gap that exists for the Chinese consumer.

Data provided by the National Pork Board show that China has a 24.5 million metric ton shortage of pork due to ASF. The Pork Checkoff and the USMEF are partnering to take advantage of this shortage by building relationships with suppliers and customers to minimize risk in this volatile market.

According to the Checkoff-funded China Market Assessment, "by 2025, China is projected to have rebuilt its herd and imports of pork will be displaced while the Chinese government walks the fine line of making investments in their domestic industry and keeping pork prices affordable for as many domestic consumers as possible."

2020 year-to-date pork exports; top seven countries by volume and value

Norman Bessac, NPB vice president of International Marketing, sets the table of past hurdles and the task in front of his organization and the U.S. pork industry.

"Obviously we came into this year with an expanding pork supply and pork exports on a rapid pace," he says, while acknowledging that the COVID-19 pandemic has created "some uncertainty and turbulence," causing the industry to assess the strategy for growth.

While the world's pork producers have their eyes set on the Chinese market, and Bessac says "We're very glad that business in demand is there right now and we want to take advantage and capture that value while we can … we don't think it will be there for the long term."

The U.S. pork industry has been seen around the world as a consistent supplier, and while COVID-19 maybe caused a hiccup in the supply chain, Bessac sees the ship is being steadied. "As things start to stabilize I think it reinforced that we were on the right strategy, that we need diversification. We need to create value for pork. I'm extremely encouraged when I look at those July numbers, and I think it'll also bear out when we get August and September, but anytime you look at value being up 22% and volume being up 20%, that's a good trend. That's saying that we're getting more value for the volume that we are shipping, and that value translates back through in the value of pork and helps support the value of hogs. … it has reinforced our strategy and our focus, and we're encouraged to what we see here in the last half of the year."

Pork exports last fall were "pretty large," and Dermot Hayes, Iowa State University economics professor, says it would be great if we could see an encore performance this fall, "but we're also heading into a world economy that's going to go into recession because of the austerity created by COVID and the borrowing that's happening right now. My hope would be we can match the export numbers. … it's amazing that we managed to pull off the 20% to 22% increase up to July given what's going on in the U.S. infrastructure and world markets. The export outlook is very, very positive, in part because China is vacuuming in pork from everywhere."

Hayes acknowledges concern about countries that will have to go into austerity, "and where U.S. imported pork is a luxury that may not be as strong as it was in places like in Colombia."

To mix a metaphor, you don't want to put all your pork in one basket, and that is true in the global pork market. While getting a foothold into filling the Chinese pork market, the U.S. pork industry needs to look beyond the largest pork-consuming country in the world.

"We've got to diversify our country and our product mix, so that we insulate ourselves, as best we can from future risk," Bessac says, "and so that is where we're putting a lot of our investment in promotion, education and research. And finally, we've got to develop some new markets."

The Pork Checkoff and USMEF partnered on a market assessment study on opportunities in China, and building on the success of that report, the two organizations again have their sights set on Asia, but this time looking at Vietnam and the Philippines.

Just like China, Vietnam and the Philippines are also dealing with the impact of ASF on their domestic pork production. According to the USMEF, ASF was first confirmed in Vietnam in February 2019 and saw its swine herd significantly reduced prompting a sharp increase in Vietnam's demand for imported pork.

Vietnam has historically been largely self-sufficient in pork production, but through July of this year, the USMEF says exports of U.S. pork to Vietnam nearly tripled year-over-year to 11,155 metric tons, up 173%. Export value more than tripled to $24.2 million, up 212%. In July alone, pork muscle cut shipments to Vietnam reached a new monthly record of 2,443 mt, valued at $5.3 million.

Sabrina Yin, who oversees Southeast Asian operations for the USMEF, says that despite COVID-19 restrictions limiting travel and face-to-face interactions with Vietnamese importers, USMEF is taking every opportunity to educate them about the safety, quality and versatility of U.S. pork.

While ASF wasn't confirmed in the Philippines until September 2019, the deadly swine pathogen still impacted that country's domestic herd, and a need for pork imports. According to the USMEF, U.S. exports to the Philippines got off to a slow start in 2020, but picked up significantly in June. For January through July, exports were steady with last year at 21,735 mt, while value increased 8% to $54.3 million. Yin notes that the Philippines is a well-established destination for U.S. pork, and buyers there recognize the U.S. industry as a reliable, consistent supplier.

Bessac says fact finding is about half done with the market assessment into Vietnam and the Philippines, with the final results of that study to be shared during the USMEF fall meeting in November. Though this is a one-year project, assessment looks at market potential five years down the road.

Though the full report won't be available until November, Bessac says preliminary findings have merely supported what the U.S. industry already knew about the market for pork in those countries. "Vietnam is probably been the one hurt more by ASF, and the other contextual difference is the Philippines has said they would not accept product from Germany or Poland. They've been in that since I think mid-2019, and Vietnam has been open. It's very comfortable with taking that product if it was under a regionalization or compartmentalization type of program," Bessac says.

Can the U.S. benefit from the recent discovery of ASF in that German wild boar that resulted in countries closing their borders to German pork?

"The futures market responded favorably over the last week," Hayes says. "So the experts, and they are experts in trading that market, certainly believe that this is very positive for us. Norman and I were discussing the possibility that pork in the E.U. will just shuffle around, and Germany will export more to France from France to China, et cetera, or Denmark. So it's padding our pockets in the sense that producers who can now lock-in a hedge or hedge a profit because of that change, whether it's as significant as the traders believe we'll have to wait and see."

Bessac says Germany would have been the No. 2 supplier in South Korea. "That market is pretty soft for us this year. Germany primarily supplies frozen single rib bellies, while the United States provides a full mix of products including boneless butts. I think there's some pockets where we'll get a little bit of a bump here and there. I tend to agree with Dr. Hayes. I don't see a huge bump here. These markets tend to adjust and even out. … I think this probably has more of an implication in the long-term than probably the short-term."

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