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September 28, 2016
U.S. Pork in the Global Market &
Outlook
A Lost Message in Our Noisy Media• The U.S. has a massive, globally competitive
manufacturing sector• This sector had a $178 billion U.S. trade surplus over the
past 5 years• This manufacturing sector produces virtually zero waste
and is a model of ‘sustainability’• It cannot be outsourced
– This sector is broadly more competitive than any country on earth
– It is “land-based”• U.S. farmers and ranchers produce the safest, most
affordable food on earth
Source: FRED, U.S. Federal Reserve Bank
Why Trade?• Theory of trade: Produce what you do the best,
and trade for the rest (bananas, coffee)• Maximum value: The “Exploding Carcass”
– Match products with consumers ($575 million in offal exports in 2017; feet to Asia, rinds to Mexico)
• Trade is a two-way street– U.S. pork imports: 94 mil lbs/mo– U.S. pork exports: 417 mil lbs/mo– Should we fear imports?
• Only if we are not competitive…
• What is the net benefit of trade?
Source: US Dept of Commerce
U.S. Agriculture Trade
Three Questions
Globalization: Friend or Foe?Free Trade Agreements?
Is China the Market of the Future?
Globalization: Friend or Foe?• If you’re a Japanese hog farmer: Foe• If you’re a Japanese pork consumer: Friend• If you’re a U.S. hog farmer: Friend• Get my point?Is U.S. ag competitive globally? YES
– Grain, beef (grain-fed), pork, poultry (cheapest on earth), dairy
• Two risks:– Increasing U.S. regulations, (cost increases)– Lack of FTA access (no deals)
Free Trade Agreements?• Have fueled U.S. agriculture for decades
– Ag duties among the highest globally; meat duties are highest
• But… of the last 100 FTAs, the U.S. has been a party to 2
• We must do better (seeking, negotiating, enforcing)
• TPP: half of the Japanese beef market is at risk (over the next 10 years)
Source: USDA/FAS
Is China the “Market of the Future?”
1. Mexico2. Canada3. Japan4. China
Source: GTIS, AgriTrends
Is China the “Market of the Future?”
Oh, and one other thing…
Enemies at home, and abroad…
“We think it’s better to price meats earlier in the chain, it’s easier,” - Dr. Maarten Hajer
Global Livestock Industry Must Unite Around a Consistent
Message
“It is socially irresponsible to legislate yield-reducing practices”
“Nearly a billion of our common population is food insecure; now is NOT the time to legislate
regulations that raise costs and reduce supplies”
Pork Market Outlook
• Macro Factors• Global Pork 2017• U.S. Pork 2017
Source: IMF July 2016 Outlook
Source: USDA, Fed Reserve
Source: UN/FAO
Source: UN/FAO
Source: NYMEX, FAO
Source: various sources, Warren Prosser
Global Pork 2017
Global Meat is Diverse & ComplexGlobal meat trade is a complicated web of politics, culture, and economics (in that order!)
– Perishability– Bio-safety– Fragmented markets– Politically sensitive– Culturally diverse
Seoul, Korea – Riots against U.S. beef, June 2008
60 million peasant farmers raise 40% of China’s pigs (half of the worlds pigs in China)
85% of U.S. chicken “paws” are eaten in China (for higher prices than leg quarters)
Source: Various global sources, USDA
Source: USDA, Fed Reserve
Cheaper U.S. Pork = Better Exports?
PEDV USD rally
China Pork• Market still HOT on tight supplies; liquidation
of 2+ mil sows (but not 13 million)• Hog and piglet prices posted RECORD HIGHS• Imports SURGING • Profits above US$170+/head (6 months)
– Expansion occurring– But longer lag than U.S.
• Corn policy adjustments: cheaper corn ahead– 250 mmt (9 bil bu) in storage
China Pork• Data is limited• Big question: Expansion???
China MOAAgriTrends average of Chinese market reports
Source: China Customs
Source: China and Hong Kong customs data, includes variety meats, Agritrends forecasts
Source: BPEX, USDA, U.S. Fed, AgriTrends
Source: BPEX, USDA, U.S. Fed, AgriTrends
Source: BPEX, USDA, U.S. Fed, AgriTrends
U.S. Pork Exports 2017
Source: USDA/ERS, AgriTrends Forecasts
Source: USDA/ERS, AgriTrends Forecasts
Source: WASDE, AgriTrends forecasts
Source: USDA/FAS
How Much is TOO Much?
Source: USDA, WASDE Forecasts
Source: USDA, CME
Global Food Demand
• +78 million people per year (global growth)• Global middle class to rise from 2 billion to
4.9 billion by 2030– Asia driving global food demand– But also, less-developed nations
globally– New opportunities for further-
processed and consumer-ready food products
Denver, Colorado
40
Thank You
Brett [email protected]
303-803-8716@agritrends
www.globalagritrends.com