CHINA AND U.S. PORK EXPORTS - A SPECIAL CASE  

    

 "We have always known that China held more potential than any market in the world for increased pork sales.   

 

"Today, because of African Swine Fever (ASF), that potential is off the charts, offering the single greatest sales opportunity in our industry's history."  

   

June 11, 2019

Mexico's retaliation against U.S. tariffs on imports of steel and aluminum,

China's retaliation against those same steel and aluminum tariffs, and

China's retaliation against the tariffs arising from the 301/Intellectual Property case against China.

African swine fever does not impact human health, but it's almost always fatal for hogs.  There is no vaccine for the disease.  It has spread to every province in China.  Because ASF is spreading not only in China but throughout Asia and Europe, my organization, the National Pork Producers Council, is working very closely with USDA and Customs and Border Protection to minimize the likelihood of the introduction of this deadly disease into our country.  But the USA remains free of this deadly disease, and the reality is that China will need large volumes of imported pork to cope with the drop in production due to ASF.

Industry analysts estimate that China will lose more production than all the pork the United States of America produces.  Once China gets through the backlog of culled animals - and that process is going on now - Chinese pork prices and pork imports will surge. 

Hog farmers around the world - and indeed the entire meat-protein complex around the world - are watching closely the ASF developments in China.  Many hog farmers around the world are making plans to supply China with the pork it needs.  Unfortunately, as previously mentioned, the U.S. pork industry is faced with a retaliatory tariff of 50 percent over and above duty paid by other exporters. 

U.S. pork production costs are among the lowest in the world, with safety and quality that are second to none.  But for the retaliatory duties, the United States would be in a perfect position to take advantage of this massive import surge.  Pork prices in key exporting countries have already begun to show the impact of ASF.  Spanish and German prices are now 10 percent higher than prices in the

U.S. The price difference will grow once the import surge begins. 

Chinese buyers are currently visiting Europe, Canada, and Brazil to establish business relationships and line up supplies.  Markets in most of these countries are sending price signals to hog farmers to expand.  Once new facilities are built in places like Spain, Germany, Brazil, and Poland, they will remain in production even if pork prices fall.   The clock is ticking.  Unless the U.S. and China soon settle their trade dispute, what should be a time of enormous prosperity and growth for U.S. hog farmers will instead fuel jobs, profits, and rural development in competitor nations. 

Just chronicling the ripple effects of African swine fever is a dauting task.  It has spread from China to other countries in Southeast Asia, including Vietnam, Malaysia, Cambodia.  Chinese imports of pork were some 63 percent higher last month than what they were in May 2018.  Hog prices in third-countries are up, as noted by Mr. Giordano above.  And there are numerous other consequences, including, for example, the tightening of supplies of the anticoagulant heparin, much of which had been supplied from Chinese hogs.

And all of this is set against the background of what Mr. Giordano described as "the challenges faced by the Administration in recalibrating U.S. trade policy towards China," challenges which, he said, U.S. hog farmers understand.

It is not an overstatement to say that the whole world will be watching the G-20 Summit in Osaka this week, watching with fingers  crossed and hoping for some positive outcome, some easing of the trade tensions between the United States and China, when President Trump and President Xi meet at the end of the week.  Few if any expect a deal.  What the optimists are hoping for is a restart of the negotiations, with perhaps some hint of progress yet to come.

Will pork be part of the solution to the trade challenges of the United States and China?  We don't know, but it should be.  China's supply challenge - the huge losses to Chinese pig farmers - could not be more dramatic, and, as noted above, African swine fever in China is already boosting China's imports and third country hog prices.  Easing the trade tensions in this sector would seem to be as much in China's economic interest as it is in America's.  It may also be in China's strategic interest.  What's the difference?  China's economic interest is simply supplying the country's enormous demand for pork.  But buyers have leverage, and with the U.S.-China geopolitical rivalry likely to continue for years to come, there may-be long term downsides to China from any permanent diversification away from U.S. suppliers.  But we are getting ahead of ourselves.

We too have our fingers crossed, hoping that the good friends who lead the world's two largest economies will have something good to say later this week.