Approaching 2021, a major focus for the U.S. pork industry — and its competitors throughout the world — is the pace of recovery in China's hog production. Estimates vary on how quickly China will return to the level of pork self-sufficiency it achieved prior to the entry of African swine fever in 2018. But in recent months, China's softening hog prices and other indicators suggest the recovery is gaining momentum.
For pork exporting countries like the United States, this underscores the importance of maintaining a diverse range of export destinations.
"China's unprecedented demand for imported pork is not going to suddenly disappear, and in fact we expect 2021 to be the second-largest year on record for U.S. pork exports to China," explains U.S. Meat Export Federation Economist Erin Borror. "But China's demand does appear to be moderating, which means there will be large volumes of pork globally that need to be directed elsewhere."
Although the U.S. industry is the least "China-dependent" among major pork exporters, China took about 36% of total U.S. export volume from January through August of this year. In September, U.S. exports achieved 10% growth year-over-year, with China's share declining to 28%. For this trend to continue, strong demand for Mexico — traditionally the largest volume market for U.S. pork — is critical.
"There are many key markets where exports must perform well in order for the U.S. industry to keep exports on an upward trajectory, but Mexico definitely tops the list," Borror says.
In the first quarter of 2020, U.S. pork benefited from Mexico's removal of retaliatory tariffs in late-May 2019 and the stability provided by approval of the U.S.-Mexico-Canada Agreement. First-quarter exports to Mexico grew by 10% in volume and more than one-third in value, and U.S. pork regained market share lost during the yearlong metal tariff dispute with Mexico.
The COVID-19 pandemic halted that momentum in the second quarter. Foodservice demand evaporated with Mexico's strict quarantine measures, resulting in the closure of all dine-in restaurant options. Temporary disruptions in the U.S. supply chain and a weakened peso also contributed to a disappointing second quarter for U.S. exports to Mexico.
COVID-19's impact on Mexico's economy endures, but the peso has rebounded to some degree and U.S. pork export levels to Mexico are gradually recovering. September exports were below 2019, but mainly due to a decline in variety meat. Muscle cut volume to Mexico was slightly higher year-over-year, and for the second consecutive month Mexico was the leading volume market for U.S. pork muscle cuts, surpassing China/Hong Kong. U.S. pork's share of Mexico's total imports has also strengthened, climbing from 84% last year to 89% in 2020.
Underpinning this rebound is strong growth in bone-in U.S. ham and shoulder cuts, which set a monthly record in July and maintained momentum through September. U.S. labor limitations have contributed to lower production of boneless cuts and heightened the need to move bone-in product to Mexico and other export markets. In September, exports of bone-in ham and shoulder cuts increased 46% from a year ago to 56,792 metric tons, led by Mexico (39,600 mt, up 13%) and China (11,100 mt, up from minimal volumes a year ago), plus growth to Canada, Colombia, the Philippines and Vietnam.
Mexico's focus on growing its own pork exports, especially to higher-value Asian markets such as Japan, also creates opportunities for U.S. pork. Exports now account for roughly 20% of Mexico's pork production, which is growing strongly again this year (USDA estimates 2020 production will be up 4%), and its pork self-sufficiency is about 58%.
"There is definitely room to grow Mexico's pork consumption, which fell in 2019 due largely to the retaliatory duties on U.S. pork and dropped again this year, due mostly to COVID-related factors," Borror says.
USMEF estimates that 2020 per capita consumption could be almost 1 kilogram less than the 2018 peak, but a rebound in consumption is expected to drive larger U.S. exports to Mexico in 2021. Beyond bone-in hams, opportunities exist to educate the Mexican meat trade and build demand for cuts that are currently underutilized in Mexican cuisine — such as the pork loin, as illustrated here.
Seminars spotlight outstanding value, versatility of U.S. pork loin
With support from the National Pork Board and USDA, USMEF conducted four seminars in Ensenada, Mexico, showcasing U.S. pork loin. USMEF collaborated with distributor La Canasta to attract a key audience of importers and targeted foodservice and retail buyers to the events. USDA programs supporting this project include the Agricultural Trade Promotion Program, the Emerging Markets Program and the Quality Samples Program.
EMP funding helps provide technical assistance, while QSP support allows for purchase of a container of loins used as samples in product demonstrations. The samples were then used by importers to encourage product development across their customer base. Fresh bone-in loin primals were fabricated into sub-primals, then further broken down into retail and foodservice cuts.
"Attendees were extremely interested in the cuts presented, especially the T-bone, ribeye and thinly sliced pork loin," says USMEF Corporate Chef German Navarrete, who gave participants advice and suggestions on foodservice and retail merchandising. "Response was excellent, with everyone who participated in the seminars taking physical samples with them. Catering companies were especially excited about incorporating pork loin cuts into their banquet offerings."
Six separate dishes, ranging from Mexican and Asian concepts, were prepared and served buffet-style, highlighting the versatility of U.S. pork loin. Navarrete also presented gastronomic tips for pork loin, and participants learned about the nutrimental attributes and benefits of U.S. pork. A total of 80 buyers attended, with each seminar limited to 20 participants due to COVID-19 restrictions.
Held Oct. 27-28, the Ensenada seminars were part of a larger initiative to provide technical education and develop demand for the pork loin sub-primal, an underutilized item in Mexico. Additional USMEF marketing efforts will focus on the loin and sirloin, rib end, riblets, back ribs and tenderloin.