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Amid trade disputes, smaller markets step up demand for U.S. pork

Growing exports to Canada (16,165 mt, +13%) indicate the U.S. is backfilling Canada’s product needs as more Canadian pork is bound for China, Japan and Mexico.

Retaliatory tariffs continued to pressure U.S. pork exports in January, however the industry’s longstanding efforts to diversify into new markets is filling some of that gap. January exports of both U.S. pork and beef were slightly below last year’s volume levels while export value posted mixed results, according to statistics released by USDA and compiled by the U.S. Meat Export Federation.

January pork exports were also down 1% from a year ago at 201,835 metric tons, with value dropping 9% to $494.1 million. Export value averaged $44.75 per head slaughtered, down 12% year-over-year. Exports accounted for 23.6% of total January pork production, down from 24.7% a year ago. For muscle cuts only the ratio was 20.3%, down from 21.5%.

Beef exports slipped 1% year-over-year to 104,766 mt, but value still increased 3% to $642.3 million. Export value per head of fed slaughter pulled back from the red-hot pace of 2018, averaging $284.86, down 3% from a year ago. January exports accounted for 12.2% of total beef production and 9.7% for muscle cuts only, down from 12.4% and 10.1%, respectively, in January 2018.

Results for both beef and pork were bolstered by stronger variety meat volumes. Beef variety meat exports totaled 26,630 in January, up 7% from a year ago, valued at $81.8 million (up 19%). This was fueled by strong performances in Japan, the Association of Southeast Asian Nations region and Africa. Pork variety meat exports climbed 5% year-over-year to 41,143 mt, led by increases in Mexico, Japan, Central and South America and Taiwan. But value was still down 11% to $81 million, because exports to China, the leading market for U.S. pork variety meat, remain subject to China’s 50% retaliatory duties.

U.S. pork exports grow in emerging, developing markets
Retaliatory duties continued to pressure U.S. pork exports to Mexico in January, with volume down 9% from a year ago to 66,293 mt. Export value absorbed an even harsher blow, dropping 28% to $96.1 million. While the U.S. is still Mexico’s main pork supplier, Canada’s January exports to Mexico were up 26% to 11,500 mt and EU exports increased 91% to 305 mt. Chile’s volume was steady at 690 mt.

Exports to China/Hong Kong also felt the sting of China’s retaliatory duties, dropping 16% from a year ago in volume (26,744 mt) and 32% in value ($53.2 million).

While Japan’s import duties on U.S. pork remain unchanged, Comprehensive and Progressive Agreement for Trans-Pacific Partnership countries received tariff relief at the end of 2018 and will see another rate decrease on April 1. This likely contributed to the January decline in U.S. pork exports to Japan, which were down 6% from a year ago in volume (32,910 mt) and 8% in value ($135.2 million). Lower duty rates for European pork under the Japan-EU Economic Partnership Agreement were implemented Feb. 1, so the EPA’s impact was not yet reflected in Japan’s January import data.

“Trade barriers in these large, mainstay markets are very unsettling for major customers of U.S. pork and are hurting the entire U.S. supply chain, so it is essential that they are addressed in a timely manner,” says Dan Halstrom, USMEF president and CEO. “On a positive note, the U.S. industry’s longstanding efforts to expand and diversify international destinations for U.S. pork have never been more important, and it is gratifying to see impressive growth in many of our emerging and developing markets.”

January highlights for U.S. pork include:

  • Led by continued record exports to Colombia and a surge in shipments to Chile, pork exports to South America increased 57% in volume (12,752 mt) and 61% in value ($31.3 million). Exports were also higher year-over-year to Ecuador and Uruguay.
  • Strong growth in Panama, Costa Rica and Guatemala moved exports to Central America 18% higher year-over-year in volume (7,271 mt) and 15% higher in value ($16.6 million).
  • Exports to the Dominican Republic remained on a roll, increasing 29% from a year ago in both volume (3,289 mt) and value ($7.2 million).
  • Growing exports to Canada (16,165 mt, +13%) indicate the U.S. is backfilling Canada’s product needs as more Canadian pork is bound for China, Japan and Mexico. Canadian pork production is not increasing, therefore Canada needs to import more U.S. pork to meet domestic demand. This situation will continue until retaliatory tariffs on U.S. pork exports to China and Mexico are removed and could intensify across other markets as China’s buying ramps up due to African swine fever.
  • Pork exports to both Australia and New Zealand were higher year-over-year in January, pushing results for Oceania up 22% in volume (9,272 mt) and 12% in value ($24.8 million).
  • Led by excellent growth in the Philippines and Singapore, exports to the ASEAN region were up 28% in volume (3,895 mt) and 25% in value ($9.9 million).
  • Strong demand in Taiwan pushed January exports to 2,561 mt (up 153%) valued at $4.9 million (up 70%). The results for pork muscle cuts were even more impressive, nearly tripling in volume (1,780 mt, up 196%) and climbing 149% in value to $3.8 million. Taiwan is importing less pork from the EU and Canada so U.S. pork is gaining market share, climbing from 9% in January 2018 to 19.5% this year.

Pork exports to Korea eased from the record-breaking pace of 2018 but remained strong at 18,491 mt, down 2% year-over-year, with value down 8% to $50 million

Japan, Korea set strong early pace for 2019 beef exports
January beef exports to leading market Japan increased 8% year-over-year to 25,925 mt, valued at $167 million (up 12%). Variety meat exports to Japan (mainly tongues) were especially strong, soaring by 36% in both volume (4,645 mt) and value ($31.4 million). January was the first full month in which competitors of U.S. beef received tariff relief in Japan under the CPTPP with the import duty rate dropping from 38.5 to 27.5% on Dec. 30, 2018. This gap will widen further on April 1, when the rate for CPTPP countries drops to 26.6%.

“It’s great to see Japan’s demand for U.S. beef increase in January despite these tariff rate changes for our major competitors,” Halstrom says. “But this disadvantage will become more and more pronounced over time, so negotiations toward a U.S.-Japan trade agreement cannot come soon enough. The playing field needs to be leveled as quickly as possible so that the U.S. industry can continue to capitalize on booming meat demand in Japan.”

Following a record-shattering year, beef exports to South Korea increased 4% in January to 17,900 mt, with value up 10% to $134.3 million. U.S. beef enjoys a tariff rate advantage under the Korea-U.S. Free Trade Agreement, with the import duty rate declining from 40 to 18.7% since KORUS was implemented in 2012 (the rates for Australian and Canadian beef are 24 and 26.6%, respectively). U.S. beef is benefiting from several new trends in Korea, including mid-priced steak restaurants (also underway in Japan), inclusion of beef cuts such as chuckeye roll and short plate in meal kits sold at retail and through e-commerce, and demand for a wider range of U.S. beef cuts, such as brisket point, in Korean barbecue establishments.

Other January highlights for U.S. beef include:

  • Export volume to Mexico was steady with last year at 21,194, but value climbed 14% to $101.7 million. The results for beef muscle cuts were especially strong, increasing 16% in volume (12,532 mt) and 21% in value ($78.2 million).
  • Led by Indonesia and the Philippines, exports to the ASEAN region jumped 49% from a year ago in volume (4,644 mt) and 31% in value ($20.7 million). Variety meat exports more than doubled from a year ago to 1,941 mt (up 107%), with value up 85% to $3.8 million.
  • Strong growth in Costa Rica, Guatemala and Honduras drove beef exports to Central America up 39% to 1,508 mt, while value was up 36% to $8 million.
  • Exports to Taiwan were steady with last January at 4,215 mt, but value was down 12% to $36.8 million.
  • A slow month in Hong Kong partially offset growth in other markets, as exports fell by 36% in volume to 7,047 mt, while value was down 28% to $57.4 million.
Source: U.S. Meat Export Federation, which is solely responsible for the information provided, and wholly owns the information. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset.
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