U.S. Pork Exports Weaken as China Imports Trend Down, Murphy Says

(Canva.com)

Export markets are starting to look weak, particularly exports to China, says Rob Murphy, J.S. Ferraro & Company executive vice president, research and analysis. He shared his perspective on what’s ahead in the third quarter (Q3) of 2021 during J.S. Ferraro Market Intelligence’s Q3 Big Picture Market Outlook webinar on July 21.

“The trend to China is pretty clear. It's weakening. If we lose China, if China resolves their African swine fever (ASF) problem and goes back to importing minimal amounts of pork from the U.S., that’s going to be a real problem,” Murphy says. “There's going to be a real price impact.”

He points out the bulk of orders that haven't shipped yet are down 30% from last year at this time.

“Not only are we seeing smaller shipments overseas, but we're seeing the orders are not there for the end of the year,” he adds.

However, he’s not counting China out yet. He says there’s been a lot of discussion about what's going on in China while their hog prices and import prices collapsed. He believes there are two theories.

“Some say, ‘Well, they've had a resurgence in ASF and producers are dumping pork onto the market and dumping their hogs as quickly as they can.’ That's caused a pork glut and driven prices down,” he says.

The other theory about why prices are low in China originates from the official line from the government of China that says, “We've fixed this problem. We've got ASF under control, we've repopulated herds and now we're producing a whole lot more pork than we were a year ago.”

But Murphy says the real question is, which one of those competing theories is true? 

“I tend to lean a little bit more toward the Chinese government's approach. I'm sure there has been some resurgence in ASF in certain areas of China. But I think on whole as a country, China has probably done a fairly decent job of containing the virus and rebuilding,” he says. “That's kind of where I'm hanging my hat a little bit. “

He admits he wouldn’t be surprised if at some point down the road, the U.S. hears more about ASF outbreaks in China, which could result in greater exports from the U.S. 

Another thing he is keeping his eye on is demand for pork for the Chinese New Year. 

“We know they typically come into our market and buy a lot of pork ahead of the Chinese New Year. They also have the Winter Olympics in Beijing immediately following the Chinese New Year. Those are two things that could cause a surge in Chinese buying this fall,” Murphy says.

Unfortunately, Murphy says he does not like the trend he’s been seeing so far. 

“I'm concerned because exports are so important to pricing in the U.S. markets,” he explains. “We export 30% of what we produce, so we have to keep a close eye on this.”

Read more:

How Long Will Profitability in the Pork Industry Last?

 

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