China’s announcement of a 25% tariff on U.S. pork sent rippled through the industry, as spokespeople for several organizations expressed their dissatisfaction and concern.
“Exports are extremely critical to the financial well-being of our producers,” said Neil Dierks, CEO of the National Pork Producers Council, in a statement. “Over the past 10 years, the United States, on average, has been the top exporter of pork in the world, and we’re the lowest-cost producer.”
U.S. producers export pork to more than 100 nations, Dierks said, “And those exports support 110,000 American jobs. Last year, nearly $6.5 billion of U.S. pork was exported, which was more than 26 percent of U.S. pork production.”
Dierks said China was the third largest value market for U.S. pork, with more than $1 billion in U.S. pork shipped there last year.
The U.S. Meat Export Federation also is concerned by the decision.
“The United States is a reliable supplier of pork products to China, and this decision will have an immediate impact on U.S. producers and exporters, as well as our customers in China,” Dan Halstrom, U.S. Meat Export Federation (USMEF) President and CEO, said in a news release on Monday. “We are hopeful that the additional duties can be rescinded quickly, so that U.S. pork can again compete on a level playing field with pork from other exporting countries.”
China is a leading destination for U.S. pork and especially for pork variety meat.
“In 2017, U.S. exported 495,637 metric tons (mt) of pork and pork variety meat to China/Hong Kong, valued at $1.08 billion – our second-largest international market by volume and third-largest by value,” Halstrom stated. “For pork variety meat exports only, this was our largest destination in both volume (321,116 mt) and value ($741.8 million), accounting for 63 percent of U.S. export value. Variety meat exports make a critical contribution to industry profitability, and last year these exports to China/Hong Kong alone equated to more than $6.00 per U.S. hog slaughtered.”
For the Chinese, tariffs on U.S. pork appear to be a good strategic decision, notes Chris Hurt, economist at Purdue University, saying that if China wanted to get our attention, this was an effective way to do it.
“The tariff will hurt the U.S. pork industry in key states that were generally strong Trump supporters,” he said in FarmdocDaily on Monday.
How Significant an Impact Will the Tariff Have?
“We can start by looking at the impact if we lost all two percent of our demand represented by Chinese volume,” Hurt said. “That would be expected to lower U.S. prices by about 4.4 percent or around $2.20 per live hundredweight or about $6 per head. On a carcass basis this is about $2.75 per carcass hundredweight that is roughly equivalent to lean hog futures prices.”
He admitted, however, that could be a “worst-case scenario” and the actual impact will likely be less (see his analysis on PorkBusiness.com tomorrow morning).
Concern Over Trade Wars
Americans for Farmers & Families has been a staunch supporter of the North American Free Trade Agreement, and it feels the trade situation with China creates nervousness in terms of renegotiating NAFTA.
“Moving forward with more far-reaching tariffs that result in retaliation and threaten to dismantle critical trade deals will have a crushing effect on America’s ability to create jobs here at home and feed families around the world,” said Casey Guernsey, who leads AFF’s “Retaliation Hurts Rural Families” initiative. He is a former member of the Missouri State House.
“We recall that not long ago there was serious talk about termination of the U.S.-Korea FTA,” Dierks said in the statement. “We are pleased that the U.S and Korea were able to reach an agreement that has not prejudiced U.S. pork producers or other sectors of U.S. agriculture. We recognize that the U.S. and China are negotiating, and we are hopeful that the 25 percent tariffs on U.S. pork will be short lived.”
Better to Have Eggs in More than One Basket
Halstrom said trade barriers around the world show how important it is to expand and diversify export destinations for U.S. protein products. USMEF works closely with pork organizations to “identify new and emerging markets in regions such as Central and South America, Southeast Asia and Africa, and to expand our customer base in mainstay markets such as Mexico, Japan, South Korea and Canada,” Halstrom said in the trade statement.