DES MOINES, Iowa — U.S. pork exports continue to be a focus of attention and concern as U.S. pork supplies and prices stay plentiful.
“It’s exports,” said Dr. Dermot Hayes, professor of economics and finance at Iowa State University and the Pioneer Hi-Bred Chair in Agribusiness at ISU.
Hayes is a livestock economist, as well, focusing on the swine market.
“If we produce more, the price should be down,” he said at the World Pork Expo National Pork Board-sponsored PORK Academy seminar on U.S. exports and international trade.
While lower weights or domestic consumption could be an answer for pork supplies that are plentiful and prices that are remaining steady, Hayes said exports are the key to the puzzle.
“We have more pork coming at us, and we still see some decent prices. If your supply is growing by 3 percent and your demand is growing by 4 percent, then that can happen,” he said.
As of April 2017, U.S. pork exports were up 15 percent, and between 25 percent and 30 percent of U.S. pork production is exported.
Hayes has traveled to and studied the China market for three decades, and he was preparing to travel there following the World Pork Expo.
“I’m interested in China because the numbers are big,” he said.
While U.S. pork is largely kept out of the Chinese market over the U.S. use of ractopamine, Hayes said the U.S. is benefiting from Canada and the European Union increasing exports to China.
“We are getting the backfill,” he said, adding that the U.S. is benefiting in a way that surprised him.
Hayes has long talked about the trade benefits to the U.S. if the U.S. industry dropped the use of ractopamine, a feed additive that promotes leanness, which is banned in China.
“I was pessimistic about what would happen if we didn’t drop ractopamine. I didn’t see this happening, but we are kind of getting the benefits of the Chinese market without actually shipping a lot of product there,” he said.
China imports some 3 million tons of pork annually. Hayes said countries such as Spain are stepping up production to supply that market.
The U.S. remains the world’s low-cost producer of pork, along with the Brazilian state of Mato Grosso. But with foot and mouth disease in the hog population in Mato Grosso, Hayes said that is keeping the Brazilian pork from entering some major markets.
Even with added costs for the Chinese market, Hayes said the U.S. still can produce pork more economically than the Chinese can.
“If I took the price and added on 15 cents a pound for transportation, then 20 cents a pound for the duty and then 12 cents for value-added, we can still get pork into China at a price that is lower than their production costs,” he said.
But ractopamine remains the roadblock.
“If we didn’t have this ractopamine issue, we would be very competitive against Chinese carcasses,” Hayes said.
As the U.S. and others, including South America, continue to expand their breeding herds, Hayes said certainty in trade and in foreign markets is vital.
“If all of the Americas is expanding and Europe starts to expand, we better have a market for all of this product,” he said.
Prices for domestic Chinese pork have been falling, and Hayes said some groups who focus on the China market have suggested that the country is cutting back production due to environmental and housing concerns and high land costs, which will keep production stifled.
However, with concern over the Trump administration’s talk on trade and tariffs against China, fears of a trade war could prompt protectionism and an expansion of the Chinese sow herd.
A swing toward a protectionist China could be devastating for the U.S. and the rest of the world’s pork producers.
“If it goes toward protectionism, the Chinese are going to rebuild their herd, and we’ve got 3 million tons of surplus on the world market,” Hayes said.
If not, he said he expects China’s pork imports to stabilize around 3 million to 5 million tons per year, in addition to variety cuts.