U.S. red meat exports were exceptionally strong through the first quarter of 2020, especially for pork. Both pork and beef had record growth, say U.S. Meat Export Federation (USMEF) CEO Dan Halstrom.
Helping this growth were agreements with Japan, but on an even larger scale, with China. In China, exports are up three times compared to a year ago. But, Halstrom notes, they expect that they growth rates will slow down a bit going into the second quarter, with COVID-19 partially to blame in two different ways.
“Number one is the supply chain challenges with absenteeism at pork and beef plants in March and April. That's part of it. Of course, we're seeing those numbers on the way back to normal now. But the other thing is the COVID-19 impact on demand, specifically in Mexico and Central and South America right now,” Halstrom says.
Those countries are in the “eye of the storm” in terms of food service and tourism shut down and that will likely impact numbers in the second quarter for those countries.
And though pork prices jumped domestically, and China may have canceled or delayed some pork imports, the USMEF still expects China to be a positive demand story for the second half of the year.
“I think the overall the overall sum supply and demand dynamics that were going on pre-COVID-19 has not changed. I mean, they've had severe impact to their sow herd in China due to ASF. And when we come through the other side of the tunnel here that that situation really hasn't changed. So, I see some increased demand the second half of the year,” Halstrom says.
China is a very important market for the U.S. but if you compare it to our global competition, Europe is actually the number one exporter into China. Two-thirds of European exports go to China, while only about a third of U.S. exports go there, Halstrom says. The fact that the U.S. is diverse in its export base makes it less prone to some of the variations in demand week-to-week, he notes.
In the U.S., when restaurant demand took a hit, some of the demand was able to be transitioned away from restaurant and food service chains to retail and home cooking. Has that happened in Mexico and Central America, the vacation destinations where demand has sharply declined as well?
“We're seeing it already down in Mexico and even into Central America as well. Places like Guatemala and Panama that are very dependent upon tourism as well. Now, the infrastructure is probably not as efficient as we are here. And especially if you compare it to U.S. and Asia, so their ability to turn it around is probably a little more limited, but the trend lines are there,” Halstrom says.