Pork Demand in U.S. Strong, Trade Disputes Could Hurt Exports

Consumers across the U.S. are buying large amounts of inexpensive pork, but farmers in the U.S. have become worried that trade disputes with important export markets in Mexico, Canada and China could hurt a part of their business that is very lucrative.

The outlook for demand domestically remains bright due to the strong economy in the U.S., the upcoming grilling season, and the Easter holiday purchases of ham.

Goods in general in the U.S. are attractive to international buyers due in part to the recent drop of the U.S. dollar. However, current trade disputes with China as well as slow progress with negotiations in NAFTA, the North American Free Trade Agreement, have clouded the prospects for pork exports from the U.S.

The exports are crucial for the pork industry, as close to 25% of pork produced in the U.S. gets exported.

The United States Meat Export Federation or USMEF said pork exports from the U.S. were on a pace to set new records, with volumes from January 2017 through November of 2017 of more than 2.23 million tonnes equal to $5.9 billion, compared to 2.09 million tonnes or $5.4 billion for the same length of time during 2016.

A consultant with the National Pork Producers Council said that their biggest concern was the trade situation.

The decision by President Donald Trump to slap high tariffs on imports of washing machines and solar panels has sparked worry amongst producers of pork of potential retribution from China, the largest consumer of pork in the world and the U.S pork industry’s third largest market.

Another pork consultant said that trade with China was risky and the deal over solar panels and washers did not help things. The market in China is a growing one for U.S. pork producers, but in 2017 pork muscle-cut exports declined as domestic pork in China increased.

In a separate concern, contentious modernization discussions in NAFTA negotiations have drawn large amounts of attention as the U.S. has spared with Canada and Mexico, the fourth ranked and top ranked destinations for pork exports by volume respectively.

Progress is slow after a number of sessions of negotiations, and the concerns remain that the United States could withdraw entirely from the trade agreement.

Cancelling NAFTA could threaten the profits of hog farmers, which have remained strong thanks to strong demand and low-cost feed in 2017. Those two factors have enhanced the bottom lines for meat packers like Tyson Foods.