In this file:
· U.S.-China trade war preventing meat companies from reaping African swine fever rewards
· Global exporters scramble to fill Chinese pork supply gap
· US: April Beef and Pork Exports below 2018 Levels; Lamb Still Trending Higher
U.S.-China trade war preventing meat companies from reaping African swine fever rewards
Winners include Tyson and Sanderson Farms while Hormel will lose out, according to CFRA
By Tonya Garcia, MarketWatch
June 11, 2019
With China’s hog inventory depleted due to African swine fever, the demand for imported pork is up, which would be a good thing for U.S. meat companies except the U.S.-China trade war is getting in the way, says CFRA.
U.S. meat company executives estimate that China has lost somewhere in the range of 150 million and 200 million hogs to the disease, about the equivalent of all U.S. pork production.
CFRA analyst Arun Sundaram cites expert reports showing it could take eight years for China’s pork supply to rebound from the African swine fever outbreak. It’s suspected that the outbreak has spread to other nearby countries like Vietnam and Cambodia, and even as far as Eastern Europe.
Chinese pork imports are expected to rise 41% from 2018 to 2019 even as consumption in the country dips about 9% for the period.
“We believe this dramatic shift in supply and demand will continue through at least 2020, which could be a tremendous opportunity for other large export markets to fill China’s shortfall,” the CFRA report said.
CFRA expects companies including Tyson Foods Inc. TSN, -0.13% , Sanderson Farms Inc. SAFM, +1.75% , Archer-Daniels-Midland Co. ADM, -0.06% , and Pilgrim’s Pride Corp. PPC, +1.11% to benefit from the disease, which Sundaram said could “change global protein production and trade patterns like never before.”
But tariffs are having a stifling effect.
“U.S. pork exports to world markets in 1Q19 were down 5% compared to 1Q18, largely due to retaliatory tariffs (from Mexico and China) or trade agreements to which the U.S. is not a party (i.e. the E.U.-Japan Economic Partnership Agreement),” the report said. “U.S. pork exports to China and Hong Kong were down a staggering 24% in 1Q19.”
The U.S. will likely beef up pork exports to other markets like Japan, Canada and Mexico now that the trade patterns have shifted, with pork exports expected to grow “a stunning” 20% in the fourth quarter, said CFRA. And the demand for beef and chicken is expected to increase, including in China where poultry imports have been halted since 2015 because of an avian influenza outbreak. But Chinese consumers will opt for the most-affordable alternative to pork, which could tear down that barrier.
“As a result of African swine fever, we should expect higher pork process around the globe as producers gradually ramp up production to meet demand,” wrote CFRA, which expects a 10% climb in pork prices in 2020 as China’s cold-storage inventory is eaten.
Tyson has already said that its business would benefit from African swine fever, it just didn’t know when exactly it would happen. The company said it believes it could happen in late 2019 or after.
And Sanderson Farms, which produces, markets and processes chicken, addressed some of the what-ifs on its most recent earnings call on May 30.
“If an accord is reached with China, then I do believe the United States becomes the supplier of choice to fill the protein deficit in China,” said Joe Sanderson Jr., chief executive of the company, according to a FactSet transcript. “That would benefit us more directly, and, I believe, more significantly.”
Hormel Foods Corp. HRL, +1.09% , makers of Spam and Applegate brand hot dogs, sausages and more, has raised prices, which should go into effect in the third quarter, said Chief Executive James Snee on the second-quarter earnings call late last month...
Global exporters scramble to fill Chinese pork supply gap
By Elizabeth Schroeder, Farmers Weekly (S.Africa)
Jun 10, 2019
A gap has been created for pork imports onto the Chinese market due to the African swine flu epidemic currently sweeping across the country, which had resulted in the pork output in that country declining between 20% and 30%.
“African swine fever will be the biggest influencer on global meat markets possibly for the next few years, if not the next decade,” said Tim Ryan, a Singapore-based market analyst at trade group Meat & Livestock Australia.
“I don’t think there’s going to be enough meat around the world available to actually fill the gap.”
Meat-producing nations have been vying with each other to meet the demand that has been created on the Chinese market.
According to Don Mackay, chairperson of the Red Meat Advisory Council in Australia, imported pork and poultry would be the most popular substitutes for locally produced pig meat in China.
Chinese imports of pork from Brazil were forecast to increase 61% to 250 000t this year, according to Rabobank analyst Adolfo Fontes.
At the same time, Brazilian chicken exports to China increased 49% in May compared with the same time last year.
Chicken exporters in Brazil were also benefitting from an increase in prices, with sales growing 27,3% to US$658,9 million (about R9,8 billion).
Australia was also taking advantage of the gap in the market with beef sales to China increasing 66% to 72 460t in the first quarter of the year.
Moreover, pork exports to China from the EU, Canada and Brazil were estimated to increase 40% to 1,7 million tons this year, and could potentially increase to 2,1 million tons in 2020, according to the Ministry of Agriculture and Rural Affairs in China...
US: April Beef and Pork Exports below 2018 Levels; Lamb Still Trending Higher
Source: U.S. Meat Export Federation (USMEF)
June 7, 2019
April exports of U.S. beef and pork were lower than a year ago while U.S. lamb exports continued their upward trend, according to data released by USDA and compiled by USMEF.
Beef exports totaled 105,241 metric tons (mt) in April, down 5% year-over-year, though export value was down only slightly at $674.2 million. For January through April, exports were 4% below last year’s record pace in volume (412,547 mt) and 1% lower in value ($2.58 billion).
On a per-head basis, beef export value per head of fed slaughter averaged $305.61 (down 7% from April 2018). The January-April average was $308.34 per head, down 3% from a year ago. April exports accounted for 12.5% of total U.S. beef production and 10.2% for muscle cuts only, down from 14.1% and 11.3%, respectively, a year ago. For January through April, these ratios were 12.7% and 10.2% (down from 13.4% and 10.8%).
Pork exports totaled 216,757 mt in April, down 6% from a year ago, valued at $535.2 million (down 8%). January-April exports were also 6% below last year’s pace in volume (817,025 mt) and were down 12% in value to just over $2 billion.
Pork export value averaged $50.58 per head slaughtered in April, down 13% from a year ago but the highest in 10 months. For January through April, export value averaged $47.25 per head, down 15% from the same period last year. April exports accounted for 26.6% of total U.S. pork production and 23.3% for muscle cuts only – down from 29.9% and 25.8%, respectively, in April 2018. January-April exports accounted for 24.9% of total pork production (down from 27.4%) and 21.8% for muscle cuts (down from 23.7%).
Beef demand strong in Korea and Taiwan; Japan edges lower
South Korea remains the export growth leader for U.S. beef, with April volume up 18% to 22,584 mt. April value surged 22% to $164.3 million, surpassing Japan as the month’s leading value market. January-April exports to Korea were 11% ahead of last year’s record pace in volume (78,757 mt) and climbed 15% higher in value ($578.5 million). U.S. share of Korea’s total beef imports climbed to 47.5%, up a full percentage point from last year. U.S. share of Korea’s chilled beef imports reached 60%.
Taiwan is also coming off a record year for U.S. beef exports and posted a strong April at 5,118 mt (up 15% from a year ago) valued at $47.9 million (up 14%). Through April, exports to Taiwan totaled 18,605 mt (up 6%) valued at $165.6 million (down 2%).
In Japan, where all of U.S. beef’s major competitors have gained tariff relief in 2019, April exports were down 6% from a year ago in both volume (24,149 mt) and value ($156.8 million). Export volume through April was steady with last year’s pace at 98,296 mt while value increased 2% to $637.2 million. U.S. market share in Japan is still more than 41%, but this is down from nearly 45% in the first four months of 2017. For chilled beef, U.S. share has slipped two percentage points to 47.4%. In April, Japan’s imports from Mexico more than tripled year-over-year and imports also increased from Canada (up 52%), New Zealand (up 41%) and Australia (up 9%) as competitors of U.S. beef benefited from lower tariff rates.
“U.S. beef is holding its own in Japan, but the April numbers are telling,” cautioned USMEF President and CEO Dan Halstrom. “With the April 1 rate cut, Australian, Canadian, New Zealand and Mexican beef are now subject to a 26.6% duty while the rate for U.S. beef remains at 38.5%. It is absolutely essential that the U.S. secures an agreement that will level this playing field. U.S. beef’s exceptional growth in Korea is a great example of what’s possible when tariffs are less of an obstacle.”
Other January-April highlights for U.S. beef include:
· Beef exports to Mexico continue to post strong results, especially for muscle cuts. Combined beef/beef variety meat exports through April were 2% below last year’s pace at 76,870 mt, but value increased 9% to $372.4 million. For muscle cuts only, exports to Mexico climbed 8% from a year ago in volume (47,379 mt) and 11% in value ($293.3 million).
· Strong growth in the Philippines fueled a 20% increase in beef exports to the ASEAN region as volume reached 17,770 mt, valued at $86.9 million (up 6%). Export volume also trended higher to Indonesia and Vietnam.
· An exceptional performance in the Dominican Republic is fueling a strong year for U.S. beef in the Caribbean. Exports to the Dominican Republic soared 56% above last year’s pace in volume (3,068 mt) and 50% higher in value ($25 million). The Caribbean was up 16% in volume (9,826 mt) and 18% in value ($65.2 million) with exports also trending higher for Jamaica and the Bahamas.
· Exports to Hong Kong slipped 36% from a year ago in volume (27,825 mt) and were 29% lower in value ($236.6 million). Despite a 25% retaliatory duty, U.S. beef exports to China increased 5% to 2,417 mt, but value was down 15% to $18.2 million as most of the tariff cost was borne by U.S. suppliers. China’s beef imports already eclipsed $2 billion through the first four months of this year, up 54% from last year’s record pace, but the U.S. holds less than 1% of China’s booming beef import market.
· Exports to Canada were down 15% in volume to 31,070 mt and 14% in value to just under $200 million. Demand has been impacted by larger Canadian beef production in 2019, but elimination of the 10% retaliatory duty on prepared beef products from the U.S. will help exports in this important category rebound.
Latin America, Oceania, Taiwan bolster pork exports
On May 20, the 20% retaliatory duty on most U.S. pork entering Mexico was removed, as the U.S., Mexico and Canada reached an agreement on steel and aluminum tariffs. This was obviously too late to boost April pork exports to Mexico, which sank 30% from a year ago in volume (54,971 mt) and 29% in value to $94.5 million. For January through April, exports to Mexico were down 18% in volume (232,391 mt) and 29% in value ($356.5 million).
“Lifting of Mexico’s retaliatory duties was the most welcome news the U.S. pork industry has received in a long time,” Halstrom said. “Now let’s hope the duty-free access U.S. pork has enjoyed in Mexico since late May isn’t short-lived.”
President Trump has proposed a 5% tariff on all goods imported from Mexico unless more steps are taken to curb illegal migration at the U.S.-Mexico border. The tariff would take effect June 10 and increase to 25% by Oct. 1, but negotiations are ongoing and Mexico has not yet announced any retaliatory measures.
U.S. pork also faces a significant disadvantage in China, where retaliatory duties remain in effect and competitors are positioning to fill China’s looming African swine fever-driven pork shortfall. January-April exports to China/Hong Kong were 16% below last year’s pace in volume (128,200 mt) and down 32% in value ($242 million).
Leading value market Japan has not imposed any new tariffs on U.S. pork but its main competitors (European, Canadian and Mexican pork) have gained tariff relief in 2019. January-April exports of U.S. pork to Japan were down 7% from a year ago in volume (123,166 mt) and fell 9% in value ($493.3 million), as U.S. share of Japan’s total imports fell from 36% last year to 32%. The sharpest decline was in Japan’s imports of U.S. ground seasoned pork, which were down nearly $40 million.
January-April highlights for U.S. pork include:
· A strong performance in mainstay market Colombia and excellent growth in Chile and Peru drove exports to South America 44% above last year’s record pace in volume (57,005 mt) and 42% higher in value ($136.9 million). In Colombia, where USMEF has helped bolster demand for U.S. pork through promotional campaigns, educational seminars and enhanced efforts to overcome technical barriers, exports climbed 25% from a year ago to 37,283 mt valued at $79.6 million (up 17%). Last year, even with domestic production on the rise, the Colombian market took more than $215 million in U.S. pork, more than double the value exported in 2016.
· Exports to Central America are also coming off a record year in 2018 and climbed 11% in volume (29,321 mt) and 8% in value ($68.3 million), led by growth in Guatemala, Panama and Costa Rica.
· April exports to Australia were the largest of 2019, pushing January-April volume to 37,979 mt (up 37% from last year’s record pace) valued at $98.6 million (up 21%). Exports to New Zealand are also performing extremely well in 2019, climbing 53% in volume (3,390 mt) and 36% in value ($10.1 million). Oceania is a strong region for U.S. hams used for further processing, which is especially important at a time when ham exports to Mexico and China were being pressured by tariffs.
· Despite facing ractopamine-related restrictions in Taiwan, exports increased 80% in volume (8,819 mt) and 55% in value ($19.3 million). Exports to Taiwan slumped in 2016 but have been rebounding over the past 2½ years.
Momentum continues to grow for U.S. lamb
Strong variety meat demand in Mexico and muscle cut growth in the Caribbean, the Middle East and Panama have fueled an upward trend in U.S. lamb exports. April exports totaled 1,227 mt, up 26% from a year ago, while value was up 15% to $2.2 million. For January-April, exports were up 56% year-over-year in volume (5,400 mt) and up 26% in value ($9.1 million). Muscle cut exports were up 17% in volume to 828 mt and climbed 19% in value to $5.4 million.
Complete January-April export results for U.S. beef, pork and lamb are available from USMEF’s statistics Web page.
If you have questions, please contact Joe Schuele at firstname.lastname@example.org or call 303-547-0030.
· Export statistics refer to both muscle cuts and variety meat, unless otherwise noted.
· One metric ton (mt) = 2,204.622 pounds.
· U.S. pork currently faces retaliatory duties in China and Mexico. China’s duty rate on frozen pork muscle cuts and variety meat increased from 12 to 37% in April and from 37 to 62% in July. Mexico’s duty rate on pork muscle cuts increased from zero to 10% in June and jumped to 20% in July. Beginning in June, Mexico also imposed a 15% duty on sausages and a 20% duty on some prepared hams.
· U.S. beef faces retaliatory duties in China and Canada. China’s duty rate on beef muscle cuts and variety meats increased from 12 to 37% in July. Canada’s 10% duty, which also took effect in July, applies to HS 160250 cooked/prepared beef products.
document, plus charts