Are US pork exporters facing a perfect storm?

The last two years – 2011 and 2012 – have been remarkable for US pork exporters. They worked hard and they supplied a quality product but, in crude terms, it was like selling central heating to Eskimos. They had a long list of plus factors on their side; the South Korean market boomed as FMD decimated local supplies, the Japanese market grew as the tsunami and related nuclear issues cast doubt over domestic meat/ feedgrain supply chains, China’s consumers had money in their pockets whilst their local industry had disease problems or not enough capacity, Mexican truck disputes were settled, and the Canadian pig industry was in no position to expand. On top of all that the US dollar was weak and its hog industry was ready to move from its previous (2009) shakeout to improved efficiency via better genetics and management systems. This was a perfect scenario for export growth and that’s what happened in the US (and Canada and the EU) –  as illustrated in our tables and charts in the February issue of Whole Hog. But is 2013 going to be a perfect storm for pork exports – especially for US exports?

It’s easy to construct a list of negative factors for pork export growth in 2013; South Korea’s industry has recovered, the Japanese yen has depreciated (and pork import demand was slowing even before this), China’s economy and consumer incomes are not growing so fast, and its domestic industry’s output is probably increasing as new capacity comes on stream, and Mexico and Canada are not inherently growth markets. And then we have the ractopamine “problem”. Only Henry Ford (history is bunk) could pretend that this was not a problem that was not waiting round the corner. A good first year student of international trade disputes would know that arguments about Phytosanitary rules are as predictable as bears looking for a rest room in the forest.  With Russia and sensitive Asian buyers in the mix the bears would not need to look far for a place to make a mess.  Worst of all, if the Yen falls and the Eurozone falters, that leaves the US dollar in a relatively strong position i.e. US pork will be more expensive for foreign buyers this year. Back on the home front farmers’ optimism about corn prices has resulted in no discernible cutback in breeding herd numbers or the hog inventory in 2012/13 and, with improved productivity, pork production is likely to hold up at least through the first half of 2013.Don’t forget either, that meat consumption per capita is falling in the USA so the American consumer is not likely to come to the rescue – no matter how good a BBQ season it might be.

In summary, 2013 looks like pork demand down, and hog supply stable or up. That equates to lower hog prices and some misery for hog producers/pork exporters in the USA. Canada and Denmark will have their share of the pain too.   Roll on 2014…..

Dr John Strak, Editor Whole Hog