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Pork Exports Continue Near-Record Pace

U.S. pork exports maintained their solid performance in May, continuing on a pace to set a new annual record for the value of exports, on a “per-head-slaughtered basis,” and achieve the second-highest annual total value of pork exports – even though industry-wide production is down for the year.

U.S. pork exports maintained their solid performance in May, continuing on a pace to set a new annual record for the value of exports, on a “per-head-slaughtered basis,” and achieve the second-highest annual total value of pork exports – even though industry-wide production is down for the year.

In May, the United States exported nearly 28% of total pork (pork plus pork variety meat) production. Over the first five months of 2010, just over 24% of total production was exported, putting the industry roughly on track for the record year of 2008, when the United States exported 24.4% of all pork.

For producers, the positive news is that the export value per animal processed in May was an impressive $53.10 – nearly 30% higher than the $40.90/head value recorded in May 2009. While it may not be realistic to maintain that price level, it is very possible that the average export value per animal in 2010 will exceed $45/head, easily surpassing the record of $42.30 set in 2008 and the $38.44/head total recorded last year.

Thus far in 2010, the United States has exported 787,869 metric tons (1.7 billion pounds) of pork valued at more than $1.9 billion. As we analyze global production and consumption trends, it is very realistic for the value of U.S. pork exports to exceed $4.5 billion this year, eclipsing last year’s total of $4.3 billion, while falling behind only the $4.88 billion total achieved in the record-setting year of 2008. Exports that year (2008) benefited from significant demand from China and Russia. Both countries have had access limitations for U.S. pork this year.

China Ranks Third
For reference, China was the third-largest destination for U.S. pork exports in May of 2008, importing more than 28,539 metric tons (62.9 million pounds) valued at $59.1 million.

For the first five months of this year, direct U.S. pork exports to China – the world’s biggest pork producer and consumer – stand at only 9,670 metric tons (21.3 million pounds) valued at $35.8 million. To be fair, the Chinese market was effectively closed to U.S. pork due to concerns related to the H1N1 influenza virus from May of 2009 until fairly recently. Still, exports are not expected to return to 2008 levels, since the price spread between United States and Chinese hogs is relatively close, thus removing an advantage U. S. pork enjoyed in 2008.

Similarly, Russia set records for U.S. pork imports in 2008, but this year cut the United States’ quota for pork exports in half. May results, however, showed progress as exports returned to 88% of the volume and 97% of the value achieved in May 2009.

Optimism for the Rest of 2010
Beyond the return of access to China and signs of a rebound in Russia, there are a number of very positive signals for pork exports that fuel optimism for the balance of 2010.

Despite being at the epicenter of the H1N1 influenza outbreak last spring, Mexico continues to be the largest volume destination for U.S. pork, increasing 7% in volume (225,672 metric tons or 497.5 million pounds) and 27% in value ($401.5 million) over the record pace established in 2009. May exports slowed slightly compared to the previous month, however, due in part to record-high ham prices.

By far the largest international market for U.S. pork in terms of value, Japan, is showing signs of recovery from the slump of early 2010. May exports exceeded the year-ago level by 18% in both volume and value, raising the cumulative total to 180,326 metric tons (397.5 million pounds) valued at $671.2 million. For the year, total U.S. pork exports to Japan remain down 6% in volume and 3% in value compared to 2009, but its rebound may help offset any decline seen from Mexico.

While China’s imports of U.S. pork have slowed significantly, exports to Hong Kong continued their strong momentum in May, with the cumulative 2010 total reaching 95,686 metric tons (nearly 211 million pounds) valued at $135.2 million – an increase of 40% in volume and 24% in value. Hong Kong is a bright spot for pork variety meat, with exports up 56% in volume and 44% in value. Muscle cut exports to Hong Kong also have increased in both volume (23%) and value (11%) over the first five months of 2009.

Canada remains a key pork export market. For the first five months of 2010, exports are up 15% in volume to 73,810 metric tons (162.7 million pounds) and 25% in value ($246.5 million) over the same period in 2009. Through June, live hog imports from Canada were 16% smaller than last year at 2.79 million head. This is roughly one quarter of Canadian hog slaughter, compared to about 30% over the same period last year.

The Philippines has emerged as a tremendous growth market for U.S. pork, with volume nearly doubling over last year to 29,227 metric tons (64.4 million pounds) and value increasing by 119% to more than $55 million.

May exports to Central and South America were down slightly from April, but the cumulative total increased 42% in volume to 25,264 metric tons (55.7 million pounds) and 46% in value to $56.4 million over last year. The top markets of Honduras, Guatemala and Colombia all achieved significant growth.

Sales Slump in South Korea
One key export market that has slumped this year – although not without cause – is South Korea. For the month of May, pork exports to South Korea edged over year-ago levels by about 10% on comparable volumes, but last year’s exports were reduced due to the H1N1 influenza scare. For the year, total pork exports to Korea remain about 23% down in volume and 25% down in value. One factor behind this decline has been the rising price of U.S. picnics, a mainstay export item to Korea. Picnics are primarily used in processing, so they tend to be price-sensitive. Also, Korea’s domestic pork production is up about 8% over last year, resulting in a drop in prices of more than 10%. The United States is still the largest foreign supplier of pork to Korea, but Chile has emerged as a top competitor. Chilean pork faces lower tariffs in South Korea due to a bilateral free trade agreement.

Chefs Shine
U.S. Meat Export Federation (USMEF) has focused a significant amount of resources on key markets, including Korea, Japan and China, to capitalize on opportunities to expand U.S. pork exports there.

Understanding the incredible potential that China offers, USMEF conducted a spring 2010 meeting of the Cookism Club in Sanya, China for 90 restaurant owners, executive chefs and club members (including 15 who flew in just for the event). With the support of Pork Checkoff and USDA Market Access (MAP) funds, USMEF brought in guest chef Patrick Barrett from Hong Kong to explain to the visitors how they could realize profits up to four times higher with new, low-priced U.S. pork items, and demonstrated how with a number of U.S. pork cuts, including Kurobuta pork, boneless pork chop, CT butt and jowl meat.

According to Joel Haggard, USMEF-Asia/Pacific senior vice president who coordinated the event, “the interaction helped the chefs and restaurant owners understand that they could look beyond regular pork cuts to develop new dishes, and that by using low-priced and economical U.S. cuts and their culinary skills, they could create exciting new menu items and make their restaurants more profitable.”

USMEF also is showcasing U.S. pork at the USA pavilion at the Shanghai Expo, or World’s Fair, that opened May 1 and runs through the end of October. The Expo is expected to attract more than 70 million visitors. Already, more than two million have visited the USA pavilion.

With support from Pork Checkoff and USDA MAP funds, USMEF participated in a day-long food demonstration, media event and VIP dinner reception to introduce fresh chilled U.S. “natural” pork. Product was flown from the United States just hours before the Expo opened, enabling traders and Shanghai foodservice operators to examine U.S. pork sub-primal cuts while guests dined on slow-cooked U.S. pork back ribs during the evening. The importer of the U.S. chilled pork is in discussions with a local, high-end supermarket to sell the new chilled pork line.

In South Korea, USMEF recently hosted 35 chefs from leading Seoul hotels and restaurants for a three-day U.S. Meat Culinary Camp covering both U.S. pork and beef. For pork, the program focused on creative new menu ideas designed to feature U.S. pork as a center-of-the-plate item. Pork spare ribs and pork belly were among the featured cuts demonstrated by celebrity chef Jay McCarthy and Dr. Fred Ray, quality control and food safety director for Outwest Meat Company.

In South Korea, chefs from top hotels and restaurants are viewed as trend setters. If they adopt new cuts or products from specific countries, it is seen as a signal that these are high-quality, preferred products. For that reason, USMEF was pleased that the attendees included chefs from top hotels, including the Hilton, Ritz Carlton, Grand Ambassador, Intercontinental, Westin Chosun, JW Marriott, Walkerhill, Hyatt, Shilla and Lotte.

With the increased competition the United States is facing in South Korea – the sixth-largest market for U.S. pork – USMEF is continuing to explore a variety of niche opportunities for growth, such as Koreans’ love of tabletop barbecue cooking. One innovative Korean restaurant chain that first opened its doors with a single restaurant just 13 months ago already has expanded to 19 restaurants. Its menu is built around a single item: chilled U.S. pork skirt meat (known as galmagi in Korea).

Part of the St. Louis sparerib in this country, galmagi has been enthusiastically adopted in Korea. The popular Nano Galmagi chain is selling 4.5 metric tons (nearly 10,000 pounds) of chilled U.S. pork skirt meat every week and would open more restaurants if it had a guaranteed supply.

The meteoric growth of Nano Galmagi is a demonstration of the appreciation we see internationally for U.S. pork and the potential for export growth when carcass utilization is maximized. Even in fully developed markets like Japan and Korea, there are opportunities for continued export growth in key segments and niches.

Erin Daley
U.S. Meat Export Federation (USMEF) Economist