The fallout from China’s decision to cancel 12,300 metric tons of U.S. pork produced for China has resulted in a massive ripple effect across the entire red meat industry.
“There’s a lot of moving parts with this whole situation with China,” Dan Halstrom, president and CEO of the U.S. Meat Export Federation (USMEF) told AgriTalk’s Chip Flory. “First of all, there’s a lot of jostling that goes on in a normal environment from one week to the next. So, that in and of itself is not that abnormal.”
But we all know there’s a lot going on right now when it comes to tariffs. With an inbound duty of 172% on U.S. pork going into China, and beef not much better at 147%, business is shut off for all practical purposes.
“Part of that jostling on the reports has to do with the question of will the vessels arrive in time before the magic date where the duties go even higher?” Halstrom says. “We’re in a situation that’s extremely volatile, but for all practical purposes on pork and beef, the business that was going into China has now been deployed and diverted to other markets or even here to our domestic market.”
Do We Need China?
Halstrom says it’s not easy to move pork and beef variety meats. Although some of that product can be diverted to other markets like Mexico, which is the second largest market for U.S. pork variety meats, there’s still some cuts like hind feet that don’t have a destination anywhere else — and certainly not at the price that China pays.
“The overriding problem a lot of people forget about is, ‘Yeah, you might be able to sell a lot of this product somewhere else, but the price will be lower.’ The reason it’s lower is you’ve got one of the major buyers in the global market that’s not on the playing field,” Halstrom says. “Any time you have less buyers, your price is going to be lower. And that’s what we’re dealing with today on a variety of products.”
Global demand for U.S. red meat has never been better – even in China, Halstrom adds.
“The problem in China has nothing to do with demand for U.S. beef and pork,” he says. “This is a political situation. What we’re picking up (we don’t have any inside track knowledge here), is if it was up to the trade, business would be going today because the trade is demanding our product. They do not want shortages of food in general, specifically protein.”
In that regard, Halstrom says the U.S. has some leverage. He believes there is a real effort taking place to get things improved from where they are today. And from his perspective, that couldn’t come fast enough.
Can Mexico Save Us?
Flory points out how a tomato trade issue with Mexico could turn into an issue for meat producers.
“Mexico’s President Claudia Sheinbaum says if there are tariffs on tomatoes from Mexico into the U.S., she might be targeting chicken and pork,” Flory says.
Halstrom explains this is tough news for the U.S. pork industry as Mexico is its largest market by far, making up about 30% of its global exports and bringing in over $2.6 billion last year.
“We do have a little bit of history here,” he says. “Back in 2018, we went about 10 months where Mexico had put an incremental duty of 20% on U.S. pork cuts. By our estimation, that cost the industry easily at least $1 billion in lost revenue.”
Chad Leman, an Illinois pig farmer, told Flory in AgriTalk’s Farmer Forum on May 7 that the U.S. can’t let this happen again.
“Just think what a BLT sandwich is going to be if we keep arguing about bacon and tomatoes? We can’t mess with this,” Leman says. “In all seriousness, we’ve got a couple of months to work this out.”
Leman says we can’t afford to mess with exports to Mexico when it comes to pork, and Halstrom couldn’t agree more.
One difference between what happened in 2018 and what’s happening today is that there’s a new competitor in the wings: Brazil.
“Today, Brazil has a zero-duty agreement with Mexico,” Halstrom says. “They do not have a free-trade agreement, but they do have a zero-duty on pork going into Mexico. I cannot overstate the importance of this threat in this regard.”
But both Leman and Halstrom say the positive is that President Sheinbaum has been collaborative, pragmatic and calm through it all. They are optimistic agreement can happen.
U.S. Red Meat Can Win
“The heavy lifting is being done,” Leman says. “I know it’s concerning to a number of farmers, but it’s nice to have trade back in the national conversation. We haven’t had any trade talks for the last number of years, and now we’re talking trade again. As always with this administration, there’s a lot of noise trying to figure out where it’s headed. But, that also brings some volatility to these markets, which, if played correctly, can be beneficial to us.”
There’s no question the potential is there, Halstrom says. It may be rocky at the moment, but he believes the outcome could be positive.
“If we were on a level playing field with all these countries, we wouldn’t know what to do with all the business,” Halstrom says. “I’m not just speaking for us, but for agriculture in general. The potential is phenomenal, but it is pretty volatile at the moment while we wait.”
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