DES MOINES, Iowa — U.S. pork producers aren’t novices when it comes to challenges in their industry. But could a perfect storm of negative conditions be brewing up another 1998?
Livestock economists and officials from the National Pork Board addressed issues such as the current oversupply and low-price environment in the U.S. pork industry, trade challenges and concerns and pork consumption in a recent media call.
Len Steiner of Steiner Consulting group was able to start the call off with some hopeful news.
“The U.S. economy is growing and a growing economy is good for meat demand,” he said.
Steiner made five points to address the current state of the U.S. hog market, faced with huge supplies of both hogs and pork and slaughter capacity that currently is close to capacity with large hog numbers.
He said the post-election mood of American consumers should settle.
“Consumer confidence remained good during a brutal presidential election, and now that we know who the next president will be, we expect consumer confidence to further increase,” he said.
That confidence should boost protein purchases.
“The American public likes certainty and dislikes unknowns. With certainty should come good meat demand,” Steiner said.
The not-so-good news for those mountains of pork is that prices may take a while to adjust to allow those confident consumers to buy more pork with less money.
“Retailers have learned over the years that consumers do not make abrupt changes to their eating patterns,” Steiner said.
Consumption of meat dropped as prices rose in response to lower supplies over the last few years, but Steiner said he expects consumers to be eating more meat and that prices for meat will drop.
“The good news is that both retailers and food-service operators feel more secure about the supply prospects in the medium term. This means continued declines for meat prices at retail,” he said.
In fact, per capita consumption of the four major meats — beef, pork, chicken and turkey — is expected to be up for 2016.
“In 2016, the per capita disappearance of the four major species is projected to be 259 pounds per person, 5 percent higher than two years ago and the first increase in seven years,” Steiner said.
One key to keeping the U.S. pork market and U.S. pork producers financially fit is maintaining exports.
With President-elect Donald Trump’s anti-trade, anti-Trans-Pacific Partnership rhetoric during the campaign, trade became a target and exports are one of the bright lights for the U.S. pork industry.
“As the pork industry expands, our best exports remain key for a healthy and profitable pork industry in the United States,” Steiner said.
Brett Stuart, an economist with Global AgriTrends, outlined how pork exports help farmers and the industry.
“U.S. pork is the No. 2 global pork exporter behind the EU bloc. Pork exports in the U.S. have accounted for 22 percent of total U.S. pork production over the last five years. In 2015, exports of pork and pork products totaled over $5 billion,” he said.
Stuart said that equals a large part of producers’ hog checks.
“If you divide that export value by barrow and gilt slaughter, that’s about $47 a head. Every hog farmer in the U.S., $47 of his hog check was derived overseas,” he said.
Stuart pointed out that exports help the industry in multiple ways. They add value in the form of premiums and profits and they also move product off the shelves.
After the formal part of the call, in response to a question from a reporter about whether the industry was “soft pedaling” the disappointment of a Trump vow to kill the TPP agreement, Stuart said that agreement would have helped, but the lack of it is unlikely to impact U.S. market share in TPP countries where U.S. pork has a foothold.
“We would have loved to have that TPP agreement, which would have put us a little more competitive vis-à-vis the domestic production in Japan. It would have taken away some of the protection around their domestic industry. Moving forward, we’re going to continue to ship a lot of pork to Japan,” he said.
Stuart said that the group is adopting a “wait-and-see” posture until the new president officially takes office and launches his trade agenda.
“Of course, with the election of Donald Trump, there’s been a lot of concern, there’s been some pretty heated rhetoric throughout the campaign against trade, against NAFTA, against TPP. I guess everything is speculation at this point,” he said.
Jeannine Otto can be reached at 815-223-2558, ext. 211, or email@example.com. Follow her on Twitter at: @AgNews_Otto.