As the U.S. Meat Export Federation recently reported, a surge in shipments to China helped drive U.S. pork exports to new heights in 2019, reaching 2.67 million metric tons valued at just under $7 billion. While logistical obstacles related to the coronavirus have made China a more challenging market to serve in early 2020, its demand for imported pork remains high, due in part to the impact of African swine fever. China's first confirmed ASF outbreak was in August 2018, but its shortage of domestic pork intensified in the second half of last year, prompting the sharp rise in imports.
While China accounted for a higher-than-normal percentage of U.S. pork exports in 2019, it was not the only international market to perform at a record-breaking level. Led by strong growth in mainstay market Colombia and a surge in demand from Chile and Peru, exports to South America reached new highs in both volume (152,125 mt, up 12% from 2018) and value ($382.3 million, up 16%). Exports to Central America also set new records, with shipments reaching 98,182 mt (up 14%) valued at $239.5 million (up 19%). While Honduras and Guatemala have long been the leading Central American destinations for U.S. pork, a surge in exports to Panama made it a close third and exports to Costa Rica also posted outstanding growth.
Oceania also took record-large shipments of U.S. pork in 2019, totaling 116,113 mt (up 31%) valued at $339.2 million (up 34%). With distribution and sales of fresh U.S. pork restricted in the region (especially in Australia), most U.S. export volume to Australia and New Zealand is in the form of raw material for further processing. But with the region's tight labor market and rising raw material costs, value-added processed U.S. pork products are also gaining a foothold in this rapidly growing market.
Exports within North America were not record-setting in 2019, due in part to retaliatory duties imposed by Mexico from June 2018 until late-May 2019. But despite being saddled with duties for much of the year, exports to Mexico finished 2019 just 2% lower year-over-year in value at $1.28 billion. North of the border, pork exports to Canada increased 4% in volume (214,703 mt, the largest since 2013) and were 5% higher in value ($801.7 million, the highest since 2014). Canada's pork production and exports increased only modestly last year, and it has not seen industry expansion at the same level as the United States.
Retaliatory duties also impacted U.S. exports to China, where the total tariff rate on frozen U.S. pork climbed as high as 72% in 2019 — six times the rate imposed on most suppliers. Despite this formidable obstacle, exports to China still soared to a record 575,000 mt in 2019, a 161% increase from the previous year.
China has since made modest reductions in both its retaliatory duties and its standard tariff rate for imported frozen pork, but U.S. pork still faces total duty rates in excess of 60%. In late-February, the Chinese government began accepting duty exclusion applications from importers, with some reporting successful import clearances of U.S. pork. These exclusions bring the total rate down to 33% for frozen pork muscle cuts and 37% for variety meat.
"Obviously the preferred situation would be an agreement to eliminate the retaliatory duties altogether, which would allow all U.S. exporters and their importers to compete on a level playing field in China," explains USMEF President and CEO Dan Halstrom. "But in the meantime, the duty exclusions at least provide some relief."
For pork-supplying countries that enjoy standard duty rates in China (8% for frozen muscle cuts, 12% for variety meats), China's ASF-driven pork shortage has created monumental shifts in their export patterns. The European Union's exports were record-shattering in 2019, climbing to 4.2 million mt valued at nearly $11 billion. At 2.29 million mt, China accounted for 55% of the EU's total export volume, compared to 21.5% of U.S. exports.
Canada's exports to China actually declined in 2019 (to about 250,000 mt, down 11% from 2018), but this was due to China suspending imports of Canadian red meat for about five months over documentation issues. Prior to the suspension, China accounted for more than 35% of Canada's 2019 export volume. In December, the first full month after exports resumed, China accounted for 28% of Canada's exports.
For Brazil, China accounted for 39% of its 2019 export volume, up from 26% the previous year. For Chilean pork, the percentage of total exports bound for China increased from 37% in 2018 to 52% last year.
"The obstacles U.S. pork faces in China are very frustrating, and it shouldn't be this difficult to serve customers that clearly want and need our product," Halstrom says. "But at the same time, China's trade barriers and the increasingly volatile global trade environment underscore the importance of market diversification, which has long been a top priority for the U.S. pork industry. Another benefit of having a wide range of export markets is that it maximizes carcass utilization, bolstering returns for the entire U.S. supply chain."
Developing new markets for U.S. pork requires a long-term commitment of resources and considerable patience, Halstrom explains. He is thankful for the vision and dedication USMEF's funding sources and industry partners have shown in this area.
"There was a time when it would have been hard to envision the U.S. industry being able to weather major trade disputes with Mexico and China, as well as other obstacles such as the tariff disadvantage U.S. pork faced in Japan last year," Halstrom says. "And this is just a few years removed from losing access to Russia, which at the time was the sixth largest destination for U.S. pork. Disruptions in mainstay markets are bound to happen — there is just no way around it. So our work in emerging markets in regions such as Latin America, Southeast Asia, Oceania and Africa represent an important long-term investment in the future of our industry."