Exchange Rates Shift Export Advantage To Canada Pork Vs US

By Curt Thacker

OF DOW JONES NEWSWIRES

November 3, 2008

KANSAS CITY (Dow Jones)--Recent changes in currency exchange rates shift the

near-term advantage to Canada over the U.S. in the quest for growth in export

pork sales to Japan.

Strength in the Japanese yen combined with weakness in the Canadian dollar

during the past few weeks resulted in Canadian pork being more

price-competitive than U.S. pork, according to market analysts and economists.

This is a reversal from earlier in the year when a weak U.S. dollar and strong

Canadian dollar favored U.S. exports to Japan and elsewhere.

Japan is the leading international customer for U.S. pork through the first

eight months of this year in terms of value and is the second largest in

volume. The U.S. has the largest share of Japan's pork business by far, at

around 41%, according to Bob Brown, private analyst in Edmond, Okla.

Sales of U.S. pork to Japan are expected to remain on a sound pace the

balance of the year because of its strong position as a supplier, analysts

said. The value of the yen has gained in strength against the U.S. dollar as

well in recent weeks and hit a 13-year high to the dollar just last week. While

analysts expect U.S. pork to continue to flow to Japan, competition from Canada

as well as from Denmark could become more intense, they said.

The economic crisis, credit issues around the world and a stronger U.S.

dollar against other currencies are already negatively affecting export sales

of U.S. pork elsewhere, according to industry analysts. There have been

anecdotal reports of significant reductions in sales to Russia, Mexico and

Canada in recent weeks.

Erica Rosa, agricultural economist at the Livestock Marketing Information

Center in Lakewood, Colo., told Dow Jones Newswires in an e-mail that "U.S.

pork along with other meat and poultry exports are and will continue to be

impacted for the balance of this year and into 2009."

Rosa said as of Oct. 30, the U.S. dollar was up 28% relative to the Canadian

dollar on the same day a year ago.

Through August, Canada was the second-largest supplier of pork to Japan with

a 20.6% market share, Brown said. Demark was a close third at 20%. He said

Canada has also recently expanded its hog processing capacity when the Maple

Leaf Foods plant in Brandon, Manitoba, added a second shift, which is now

reportedly up to full speed.

The company reported on Oct. 24 that the Brandon facility can now process

around 85,000 hogs per week, nearly double its previous daily output. Canada is

now processing more hogs than it could before but has a limited ability to

further increase its slaughter rate due to a lack of facilities, Brown said.

The cheaper Canadian dollar and euro will give Canada and Denmark an

advantage over the U.S. for sales to Japan as well as other international

markets, he said.

Through August, Canada was the fifth-largest international customer for U.S.

pork and showed a 23% increase in volume from 2007, according to the U.S. Meat

Export Federation. Analysts said the recent decline in the value of the

Canadian dollar to the U.S. dollar and larger slaughter capacity there may

result in more Canadian pork being offered for sale into the U.S.

Greg Wagner, senior commodity analyst at AgResource Company in Chicago, said

U.S. pork exports in August, the latest data available, were the second-lowest

monthly tally for the year, and August was the third consecutive monthly

decline. On the other hand, the August figure was still a new record for that

month, and the year-to-date total was already above the 2007 annual number.

Wagner said in the past three years, pork exports through August averaged

about 68% of the annual totals. If the trend holds true again this year, 2008

exports could reach nearly 1.604 million metric tons, which is attainable, he

said.

Wholesale pork prices have dropped sharply in recent weeks, which will also

be supportive for export sales.

Source: Curt Thacker; Dow Jones Newswires