Pork markets to become a big winner in the US-China trade truce

OSAGE, IA - JULY 25: Hogs are raised on the farm of Ted Fox on July 25, 2018 near Osage, Iowa. According to the Iowa Pork Producers Association, Iowa is the number one pork producing state in the U.S. and the top state for pork exports. The state sends about 50 million hogs to market each year and its pork exports totaled more than $1.1 billion in 2017. Pork producers in Iowa are bracing for the impact a trade war with China and Mexico may have on their bottom line going forward. (Photo by Scott Olson/Getty Images)

Just a day after the United States and China signed a phase 1 trade deal, The US Department of Agriculture released a report that delivers another optimistic message to US farmers: Chinese demand for pork is likely to boost the US pork markets in 2020.

The latest USDA report shows that 26.5% of US pork exports went to China in November 2019, making it the largest foreign destination for US pork that month. A year earlier, when the trade war was at its peak, the number was 4.9% — five times smaller than what it is today.

As the largest pork consuming nation in the world, China had to tap its emergency pork reserves in the past year after losing over 100 million pigs to the African swine fever. Now, as Chinese people start to prepare food to celebrate the biggest national holiday, the Spring Festival, demand for pork could be higher than ever.

The pork shortage has pushed Beijing to reach multiple deals with Washington amid the trade tension. In August 2019, Chinese companies bought over 10,000 tonnes of US pork even after Beijing suspended all other purchases of American agricultural products. In late December, China dropped tariffs for US pork days after releasing 40,000 tonnes of pork from its emergency reserves.

The USDA report also shows that Chinese pork was significantly more expensive than US pork after the swine fever outbreak. Starting from October 2019, the price of pork in China surpassed $3 per pound, which was twice as high as the price of pork imported from the United States, even after being adjusted for tariffs, value-added taxes, and transportation costs. According to USDA, the price gap could open up huge opportunities for the pig farming industry in the United States.

On top of that, the trade deal struck on January 15 assures US pig farmers that they will not have a hard time exporting their products this year. Among the $200 billion worth of goods that China promised to buy in the coming two years, pork makes up 16 percent.

The stock market also shows optimism for pig producers. For example, the stock price of Seaboard Corporation, a leading US pork powerhouse, increased by almost 2% just a day after the trade deal was signed by both countries.

Hannah Zhang

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