2021 U.S. Pork Exports Forecast: Not Great, But Still Pretty Good

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Headlines celebrated the good news that U.S. pork exports broke records in 2020, accounting for nearly 30% of total U.S. pork production. Exports were up 11% by volume and 11% in value as compared to 2019, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF). From January to December, 6.56 billion pounds of U.S. pork and pork variety meat, valued at $7.7 billion, were exported globally. Not a bad year for an otherwise challenging year in the U.S. pork industry history books.

So when economist Brett Stuart of Global AgriTrends forecasts 2021 pork exports down 2%, on the back of the growth the industry saw in 2020, he says that’s still a pretty big victory. 

“I think there are some good tail winds blowing as we look into 2021, even though I'm talking about a 2% export decline. I think that would still be a great year for us in exports,” he says. “2020 was a was a great year for U.S. pork exports. I think 2021 will be a good year for U.S. pork exports.”

The key assumptions in his 2021 forecast include China buying about 6% of U.S. pork production for the year. With Chinese hog prices remaining high today, even after 16 months of incredible profit in the Chinese pork industry, he says that leads him to believe Chinese supplies are still tight.
He says the U.S. pork industry has a lot of reasons to be optimistic. For example, the International Monetary Fund (IMF) just updated its global GDP growth number for 2021 at 5.5%. That’s a big global growth number, Stuart says. 

“And after a year like last year, it mostly makes up for it,” he adds. “All of that bodes well for us with better economies in key markets like Mexico and Canada.”

One of the other things he’s seeing is a weakening U.S. dollar driven partially by continued stimulus and continued borrowing. 

“That weaker U.S. dollar broadly boosts commodities, and it makes it easier for us to export,” he says.

An Eye On China and Its Lack Of Transparency
“China really dominated the story for most of the year,” says Clay Eastwood, director of international marketing for the National Pork Board. “We know that there's been a massive pull of protein into the Chinese market, not just from the U.S., but pretty much anywhere and everywhere they could get their hands on it.”

This shouldn’t have surprised anyone too much, Stuart adds. But the COVID-19 implications did surprise the pork industry and impacted trade due to price volatility surrounding shortages during the spring and summer especially. 

“We went through a phase in the spring where China bought very aggressively,” Stuart says. “In April and May, we exported over 12% (30% to the world) of our production to China for two months. But then that slowed down into the back half of the year a little bit. We're still shipping a lot of pork to China.”

China exports accounted for 6.5% of U.S. production in 2020. Two years ago, that was only 1%.

Because of this, Stuart says he’ll be closely following China throughout the year, trying to keep a handle on risk and on export markets. China’s driving higher prices in many U.S. agricultural products, including beef, pork, poultry, soybeans and corn.

“The challenge is that China is completely non-transparent,” Stuart says. “They don't have USDA reports like we do here. They don't have surveys, inventory, production numbers, weights, those kind of things. And it's a very vast and complex swine sector,” he says. 

As he looks ahead to 2021, he says China is the market that the U.S. must seek to understand because the country is in an incredible expansion mode. There's a lot going on there with the COVID-19 recovery in China, he adds.

Ride The Rising Tide and Keep Diversifying
“I think outside of China, we have good opportunities as well,” Stuart says. “China pulling on all commodities creates the rising tide that lifts all boats. I think we're going to have good opportunities exporting into other Asian countries as well as Mexico and Canada.”

Eastwood agrees and says the China story has been incredible in 2020, but she recognizes that its import story will slowly decline over time. That’s why diversification is so key as the U.S. works to diversify its export strategy. 

“We’re working closely with our partners at the U.S. Meat Export Federation, who are really our marketing arm and our ‘feet on the street’ in these global markets,” Eastwood says. “In a really challenging year where COVID turned things on its head, USMEF was able to pivot and reach consumers in a different way while creating some different opportunities for us to work in these markets.”

She says that diversification piece is really crucial and critical to the Checkoff’s strategy going forward. Specifically, the Checkoff plans to add value for pork producers through exports in 2021 by: 

•    Leveraging insights from recent market assessments of Vietnam and the Philippines to implement marketing strategies that help capture growing demand in both emerging markets. 
•    Building off the success of the 2020 pork loin program in Mexico, continuing to implement targeted, educational programs among influencers (retailers, food service, etc.) in core markets to drive interest in high value pork products with opportunity for growth in the market.

“We’re hopeful these programs will create value for new products in some of these emerging markets,” Eastwood says. “The ASEAN region, Vietnam and Philippines are top of mind, but also Central and South America are markets that we continue to be focused on. South America took some pretty good hits in terms of COVID-19 last year, and we saw our exports decline to that region. But we know they are good customers and have a desire to eat high quality protein, so we remain focused on those areas. Hopefully, we can get some diversification of cuts into those markets as well.”

Volume Vs. Value: What’s More Important?
Stuart forecasts value growing as well as volume again in 2021. 

“I've got total pork exports at $7.4 billion, up 21% this year – that's a 21% increase in value. When value outpaces tonnage, it tells you these overseas markets are willing to bid more to get that product,” he says.

So, which number is more important? Stuart says they're both pretty important. 

“Any pork product we can move out of this country supports prices, supports the market. But when we see that value growth broadly, it's a good thing for us,” he says. “The real key proposition of these export markets in terms of value is in buying cuts and items that we just don't have demand here for at home.”

Although the U.S. sends a lot of pork loins to Japan and hams to Mexico and China, it’s important to recognize the U.S. exports a lot of ears, tails, feet, stomachs and intestines – things that the U.S. simply doesn’t have as much demand for domestically. 

“The crazy thing is when we export those items overseas, they bring big prices. If we look at the average, offal value to China, it’s almost the same as the pork export value to China. So we're exporting all of those items, basically at the same rate we're exporting our muscle cuts,” Stuart says. “Those export markets provide key diversification for the U.S. pork industry, but also a huge value-add for all of these items that we just simply don't have demand for at home.”

Don’t Dismiss the Wild Card
ASF spread throughout the global pork industry continues to pose major challenges for the marketplace. 

“Germany is now out of the global export markets. Germany was a key supplier into Korea, and we see continued growth for U.S. pork into Korea,” Stuart says. “You hate to rejoice at anyone's misfortune with African swine fever because that virus is still on the move. It remains a wild card for any global pork production country.” 

Disease uncertainty makes forecasting difficult, but for now, things look promising for 2021, Stuart says. He believes the industry is heading in a good direction. 

More from Farm Journal's PORK:

Diversity is Crucial to 2021 Pork Export Success

China's Hog Futures, Company Stocks Rally on Disease Outbreaks

What Happens If? An Answer to the Question Everyone’s Asking

Pork Exports Shatter Records in 2020, 2021 Could Still Be a Big Year

 

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