Increased trade tensions are expected to impact international pork trade in the second half of 2018
By Kate Ayers
Staff Writer
Farms.com
Mounting trade tensions between the United States and China, and within North America, will likely have a significant effect on global pork trade throughout the rest of this year.
High production volumes around the world earlier this year are expected to continue weighing on prices, a Rabobank Pork Quarterly report said on Friday.
“The major changes in global pork trade reflect uncertainties arising from the increasing political and economic tensions between the U.S. and China,” Chenjun Pan, a senior analyst of animal protein at Rabobank, said in the report.
“New tariff measures on agri-products will put great pressure on several markets – mainly the U.S., China and Mexico – although the nature of the pressure will depend on each trading position.”
Disease could also contribute to uncertainty in supply and trade, as African swine fever spreads across Europe, the report said.
In addition, feed prices in some regions could squeeze producer margins.
United States
In the U.S., pork production is higher than last year, but processors have not yet used the recently added slaughter capacity to its full potential, the report said.
Mexican tariffs on American pork product will drastically slow the American pork export business. Exports to China and Canada have also fallen due to increasing trade tensions.
The U.S. is expected to trade with other countries but the higher volume of pork supplies will weigh on domestic prices for the rest of the year, the report said.
Canada
In Canada, pork production has declined due to productivity issues, weather-related plant closures, the lagged impact of PEDv and disruptive environmental controls, which has limited supply, the report noted.
Although production may slow throughout the summer, it should gradually increase during the fall and winter.
Domestic demand for pork has been supportive of prices but, with growing U.S. supplies, Rabobank analysts expect increased competition will pressure Canadian pork values.
The analysts also expect poor returns and soft demand from the U.S., which may limit growth of the Canadian sow herd this year.
Overall, Canadian pork exports were down in April and a sharp fall in shipments to China reflects a surplus of pork in that market, the report said.
However, Canada’s focus on developing a market in Japan has led to an increase in shipments to this high-value market.
Canadian exports to Mexico have also picked up, following the American disruption, the report said. Canadian producers are expected to benefit from the trade tensions between the U.S. and Mexico, as Canada may provide less complicated logistics than some of its competitors.
Canadian exports to China will improve due to the latter county’s trade tensions with the U.S., Rabobank analysts predict.