Not even the collapse in demand from China could stop the U.S. pork industry from having a good year for exports in 2021, and strong shipments are expected to carry the industry through another banner year in 2022.
Prices are rising, world stocks are tight, demand from around the world for U.S. pork is on track to strengthen, and exports could break another record this year, according to analysts.
The U.S. exported a record high of $8.11 billion worth of pork in 2021, according to calculations by the U.S. Meat Export Federation. That’s a 5% increase over the value of shipments in 2020, a year when shipments to China were exploding. At one point in 2020, the U.S. was shipping more than 250 million pounds of pork to China in a month.
By December of 2020, the U.S. was exporting fewer than 50 million pounds to China.
While U.S. pork exports to China plummeted in 2020, they ramped up to two key destinations in 2021, says Brett Stuart, co-founder of the Global AgriTrends consulting company. Importers in Mexico and Central America started buying more pork than ever in 2021 and it’s that trade — along with a resurgence in buying from China — that will boost U.S. exports again in 2022.
Although the value of exports in 2021 surpassed the value of 2020 exports, the volume of shipments dropped, although not by a lot. USMEF data shows the decline was only about 3% — not much, taking into consideration that shipments to China fell by about 30%.
"Entering last year, we knew it would be a daunting task to match the record level of pork exports reached in 2020 because of the recovery in China's swine herd and its rising domestic pork production," said USMEF President and CEO Dan Halstrom.
Dan Halstrom, USMEFU.S. exports of pork to China kicked off 2022 at roughly the same emaciated level they finished 2021 at — below 50 million pounds in January, says Stuart, but the trend line will be the opposite of what it was in 2021.
By the end of this year, in Stuart’s forecast, U.S. pork exports to China will reach roughly 200 million pounds per month. That’s a bit higher than the level at the tail end of 2020, just before the Chinese started liquidating their herd.
“In (April of) 2020 we were shipping 250 million pounds per month (to China),” Stuart said. “But 2021 came and liquidation came in January, and those Chinese prices started to slide.”
China may have started liquidating its herd in early 2021, but it was in full swing by June, says Stuart. Chinese prices skyrocketed by as much as 300% in 2020 after China killed off more than half its hogs to combat the spread of African swine fever, but farmers there were also breeding and expanding to try to take advantage of the high prices that were attracting record imports.
Most of the Chinese liquidation in 2021 was due to oversupply.
“Through the course of 12 months Chinese hog prices fell by 66%,” Stuart said. “As of now, they’ve gone for seven full months of financial losses, which has led to liquidation.”
While that may still be the case, the situation is turning around.
“The prices are still weak and there’s plenty of pork (in China), but the Chinese farmers don’t have access to capital,” Stuart said. “They can’t get loans to feed hogs if they’re losing money. If they’re losing money, they have to sell something … and usually, they’re selling sows. At some point, they’re going to liquidate too far and that’s what’s going to drive prices back up in 2022 and lead to an increase in imports.”
As of now, Stuart said, it looks like it will be this summer when U.S. producers and exporters can expect a significant increase in Chinese prices.
“There’s a 3- to 4-month lag between prices rising and imports rising, so I think it will be the third or fourth quarter when we could see some better action from China this year,” he said. “Now, I don’t think we’re going to blow the roof off, but I think we are going to get some shipments over in the back half of this year.”
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The Chinese decline last year and a resurgence in demand South of the Border made Mexico once again the largest foreign market for U.S. exporters. Mexican imports shot up by 27% last year, with the country importing a record 875,000 metric tons of U.S. pork, worth about $1.7 billion, according to USMEF calculations.
Mexican imports are expected to stay elevated this year, says Stuart.
And while the Chinese pork market is commonly referred to as a roller coaster, the markets in Latin America are, and will continue to be, a straight incline. U.S. pork exports to Central America, the Dominican Republic, Colombia and Chile barely registered 20 years ago. In 2021 those markets imported nearly $900 million of U.S. pork and the trend is expected to continue.
Tariffs and quotas have been shed because of free trade agreements with the U.S., and pork trade is flourishing. The latest development was the full phaseout of tariffs and quotas under the Dominican Republic-Central America (CAFTA-DR) free trade pact in 2021.
Steve Meyer, Partners of Production Agriculture“Look at these countries,” Stuart said about the Central and South American nations. “They have a combined population of 128 million people. Mexico has 130 million. What we have south of Mexico is another Mexico. We may hit $1 billion (in pork exports) to this group by 2022.”
Steve Meyer, an analyst with FC Stone’s Partners of Production Agriculture, generally agrees with Stuart’s expectations for U.S. pork exports this year, but he has some doubt about China.
“We expect exports to remain good this year — maybe not quite as good as last year,” he said. “It’s all dependent on China and the second half of the year. We think (China) is going to be an important part of demand going forward.”
But one thing both analysts are completely in agreement on is the danger of African swine fever.
“It’s in the Dominican Republic and Haiti,” Meyer said. “It’s still a big risk.”
It would be catastrophic if ASF were to hit the U.S., Stuart said.
“My key assumption is that we do not have ASF in North America, but if that were to happen, it would be a game-changer. If it were to hit the U.S., our export markets would close instantly.”
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