Pork industry expects to experience losses
Large pork supplies, rising costs and potential trade retaliation from both Mexico and China continue to cast a shadow over the pork industry.
Losses are expected for the rest of 2018 and 2019. According to Purdue University agricultural economist Chris Hurt, losses will be small this summer, but then the bottom will fall out.
Losses of more than $25 per head are estimated for the last quarter of 2018 and the first quarter of 2019, Hurt said.
“There is a lot of pork. Production so far this year is up nearly 4 percent with the number of head coming to market about 3 percent higher and weights up near 1 percent,” Hurt explained.
“Domestic demand and export demand have been good this year but not strong enough to offset the higher supplies. As a result, live hog prices have been down 3 percent.”
Hurt adds that trade concerns continue, but exports have remained favorable in the data that is available so far this year, which shows pork exports growing by almost 6 percent.
This is on-track with current USDA estimates for pork exports to grow by 5 percent for the entire year.
Retail demand also appears to be positive with data released for this year.
Hurt adds that the pork industry is caught up in trade disputes. “The Trump administration has chosen to use threatened tariffs as a means to voice concerns to other countries about trade policies.
“For steel and aluminum imports, the U.S. has moved beyond threats and implemented actual tariffs. The EU, Mexico and Canada recently lost their exemptions as allies of the U.S. China has always been a target of the steel and aluminum tariffs.”
With the U.S. tariffs on imports of foreign metals in place, retaliation has come from the EU, Mexico, Canada and China in the form of tariffs on U.S. exports to their countries.
For pork, the gravest concerns are Mexico, which purchased 32 percent of U.S. pork export volume in 2017.
Canada and China each purchased 9 percent of U.S. pork exports last year. Those three countries purchased one-half of all U.S. pork exports in 2017.
Looking forward, Hurt explains that pork supplies are expected to continue to be 4 percent higher for the rest of the year and may moderate to a growth rate of about 3 percent next winter.
According to Hurt, costs are expected to rise as well in 2018 in terms of labor, interest, fuel, machinery and feed.