Tariffs Tamper With, But Don’t Squash U.S. Pork Market

Dec 26, 2018

After a year that saw persistently low prices for many agricultural products — exacerbated by the retaliatory tariffs imposed on U.S. goods — farmers are eager for a recovery in 2019.

Pork producers have been working within the trade-war parameters since China imposed a hefty tariff in April. Northeast Iowa pig farmer Al Wulfkuhle said the sudden drop in Chinese demand for U.S. pork turned what had started as a promising year into a challenging one.

He expects to hold on into 2019 and said most farmers he knows are fiercely independent and perennially optimistic. So, while he couldn’t think specifically of someone whose business is on the line going into the new year, he’s concerned not all hog farmers will make it.

“That's the sad part of capitalism, I guess,” he said. “Supply and demand rules everything and it’s survival of the fittest. So, if the prices go too low too long somebody has to go out of business or cut back.”

For now, the global demand has shifted. South Korea has emerged as a much bigger buyer of U.S. pork, and Iowa State University livestock economist Lee Schulz said other pockets of demand are springing up. For example, the European Union is selling more pork to China than it used to, and that means the E.U.’s former markets could be new or larger customers for U.S. pork.

The global nature of the industry coupled with the fact that producers in the United States are able to produce more pork at a lower cost than most of their overseas competitors gives Schulz a positive outlook over the long term. Since 2014, he said, U.S. pork production has increased 16 percent and Americans have been eating much of it.

“We’re not likely to see continued growth in per-capita consumption,” Schulz said, “so that means that additional production will have to be absorbed on the world market.”  

The demand is there, but the question is how long it will take for prices to improve. With the low cost of feed, which is primarily tied to corn and soybean prices, pork producers are seeing a bit of a break in production costs. But even that is a mixed bag.

“Many swine producers are also crop farmers,” Schulz said, “so I think they’re feeling this really a double barrel or double whammy here when you look at the impact from the trade tensions.”

Wulfkuhle said he buys most of his grain, so he has saved some money.

“That’s a Catch-22, though, because everybody in agriculture has to be profitable,” he said. “So personally I don’t like it when we’re buying corn and soybean meal at a cost that’s losing grain farmers money. That’s not sustainable long-term.”

Gregg Hora, the president of the Iowa Pork Producers Association, farms near Fort Dodge and has both hogs and a row crop operation with corn and soybeans. He said the most recent U.S. Department of Agriculture Hogs and Pigs report predicts a slight uptick in the overall size of the U.S. herd.

“We do have industry that continues to grow and that we hope that in the future that we will retire some of these trade disputes,” Hora said. “We as the pork industry have encouraged the Trump administration to come to quick resolve.”

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