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USDA: Demand shocks likely to slow U.S. pork export growth

Total 2020 pork exports expected to be more than 18% higher than exports in 2019.

The U.S. pork export pace in February, particularly those to China, were unexpected, according to the U.S. Department of Agriculture’s latest “Livestock, Dairy & Poultry Outlook.” Even as COVID-19 began to dominate global headlines, total U.S. pork exports, at 658 million lb., were up 46% from February 2019.

USDA noted that weekly export data reported by its Foreign Agriculture Service (FAS) have shown particular strength in sales to China since the Chinese government relaxed retaliatory import measures aimed at U.S. pork.

While it is well known that China’s increased demand for imported pork products is a consequence of African swine fever (ASF), the spread of COVID-19 across the globe has led to concerns about how the pandemic will affect global trade.

FAS has updated its 2020 production and trade forecasts for major pork-producing and trading countries, noting that the pandemic has upended global protein markets.

“Widespread closures of restaurants and foodservice outlets as well as a reduction in tourism and travel will shift demand for protein among both types of meat as well as cuts. Furthermore, shipping disruptions have already impacted global trade by clogging ports and reducing container availability, at least in the short run,” FAS noted.

The full impact is still unknown, but FAS said the livestock and poultry sectors’ response at all levels of the supply and distribution chain are likely to impact supplies in the future.

For pork, FAS said contrasting extensive economic headwinds, impacts from ASF in China and other countries remain a dominant factor in the market. The global production forecast was 7% lower year over year, largely due to reduced output in China, Vietnam and the Philippines -- all countries affected by ASF.

As such, FAS raised exports for pork as sharply lower pork production in China is still expected to drive record trade. FAS pegged China’s pork production at 36.00 million metric tons, down from 42.55 mmt in 2019 and 54 mmt in 2018. However, COVID-19 has added significant uncertainty to the forecasts and is expected to disrupt trade in 2020.

In the outlook, USDA said it is notable that exports to Canada, Mexico and Japan registered double-digit year-over-year increases in February, likely the result of foreign buyers responding primarily to low U.S. pork prices compared with those of other pork-exporting countries.

Looking ahead, USDA said depreciation of the Mexican peso, together with uncertainty generated by COVID-19, is likely to negatively affect Latin American and Caribbean countries’ demand for U.S. pork exports.

“Lower oil prices are among the factors that have driven the value of the Mexican peso lower by almost 30% since the beginning of the year. Uncertainty surrounding the tourist industry in Caribbean countries is also likely to reduce demand for imported products,” the agency said.

Revised forecasts for quarterly U.S. pork exports are as follows: First-quarter exports are expected to be 2 billion lb. (up 38% year over year). Second-quarter exports are projected at 1.65 billion lb., 125 million lb. less than last month’s forecast but still almost 8% above a year ago. Third-quarter exports should total 1.7 billion lb., reduced by 100 million lb. from last month but more than 12% ahead of same period of 2019. Fourth-quarter exports are expected to come in at about 2.125 billion lb., 150 million lb. below last month’s forecast but more than 16% higher than a year ago. These quarterly forecasts total 7.475 billion lb. for 2020, more than 18% higher than total pork exports in 2019.

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