2021 Surprised Us, What’s Ahead for 2022 U.S. Pork Exports?
Even though U.S. pork export tonnage was down 2% last year, experts agree 2021 outperformed most expectations. Still, with uncertainty in the marketplace today – volatility, heavy inflationary environment, uncertainty around COVID-19, unanswered questions about China – can the 2022 forecast hold promise for growth in export markets?
Brett Stuart, economist and co-founder of Global AgriTrends, believes it does.
“Maybe I'm an eternal optimist. It's hard for me to ever forecast the negative number, but I did last year. This year, I've got pork exports up 2%,” Stuart says.
Here’s why.
Who’s Losing Money?
U.S. hog farmers lost a little money in December, and have experienced some tough prices and tough margins, Stuart explains. However, the U.S. is seeing prices increase.
“If I look at Brazil, China, Europe, the other major hog production bases, they're all losing money,” Stuart says. “And they have been for a substantial amount of time.”
By his estimates, Chinese hog farmers have been losing money for seven months straight.
“In the U.S., if your margins go negative, you always have that tough decision of do I go leverage my land? Do I go put some collateral down and keep feeding hogs? In China that's not an option because no Chinese hog farmer owns their land. It's owned by the government,” Stuart explains. “Chinese hog farmers just don't have the ability to step in and leverage and keep going when they lose money.”
That’s why in the Chinese hog cycle, when farmers lose money, the first thing they usually do is sell sows to keep feeding the pigs they have.
“They know the golden rule of ag econ is this: high prices fix high prices. And the inverse is also true. Low prices, fix low prices,” he says. “I think Chinese hog farmers today are looking at those accrued losses for seven months and thinking, ‘We've got to try to hang in because somewhere this is going to turn.’”
Meanwhile in Europe, they've been losing money for about the same period of time – about six to seven months, he says. Brazil farmers have also been losing money.
“There has been a strong signal around the world to liquidate,” Stuart says.
Fewer Sows to Start 2022
2022 is starting off with fewer global sows than last year, which is always a good way to start the year, he adds.
“That tells us that there's room for improvement in prices, and we're seeing it,” Stuart says. “The U.S. is the first producer to see these prices start to take off. I think it's being driven domestically as well as by a solid export market.”
Hog futures are moving up, giving U.S. pork producers a clear indication of tight supplies ahead. He says we’ve seen a good move in the cutout and hams are sharply higher across the board.
“Sitting where we sit, even with these high inflationary grain prices, we have the potential to see a good solid year of profits in the U.S. hog sector, as well as rising demand potentially in China,” Stuart says.
He notes that prices may not take off until mid-year when orders start to come in. But he believes there's a chance to get things “more straight” in U.S. trade flows with China.
It Comes Back to Value
Clay Eastwood, director of international market development for National Pork Board, says China has been a headline for so long when it comes to exports. She thinks it’s important to note that one of the great success stories regarding U.S. pork exports is value.
In 2021, U.S. pork producers captured $61 of export value per hog. That’s a record high. Export tonnage was down 2%, but the dollar value was up 6%. The U.S. exported $7.8 billion of pork and pork variety meats last year.
“The Pork Checkoff’s partnership with the U.S. Meat Export Federation has been crucial to this,” Eastwood says. “They truly are our feet on the ground in international markets, executing the work on our behalf. But along with that, it's also the partnership we have with the National Pork Producers Council on the trade policy side and work done over the last few years, getting additional funds to further leverage our Checkoff investment through USDA’s Foreign Ag Service.”
U.S. pork producers are investing heavily in international marketing efforts in 2022. In fact, 24% of the Pork Checkoff budget is dedicated to international marketing.
“Our strategy is to secure pork markets where pork demand is high but has room to grow. Diversification continues to be key,” says Courtney Knupp, vice president of international market development for the National Pork Board. “It's important for us to be able to pivot in this environment of uncertainty while maximizing value for every possible part of the pig that we're looking to export overseas.”
Industry efforts will focus on expanding business in developing markets, increasing volume and variety, and discovering new business in emerging markets by executing marketing strategies, while capitalizing on localized preferences and needs.
Read More:
Two Ways Producers Can Strengthen Export Market Opportunities
U.S. Pork Producers Snag Record-High Export Value of $61 Per Hog in 2021
China’s Growing Need for Protein: New Study Excites U.S. Pig Farmers
