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Frustration abounds as industry awaits ASF protein deficit

First-quarter export numbers show trade and disease outbreak plague animal protein sector.

“Uncertainty” is the major buzz word of the day among the world’s protein providers and protein consumers, Joel Haggard, senior vice president of the Asian Pacific for the U.S. Meat Export Federation (USMEF), said this week during a call held in conjunction with the organization’s Spring Conference. Between African swine fever (ASF) and trade, the global protein sector has much to watch this year.

Last week, at SIAL China, a Chinese trade exhibition that Haggard said is becoming one of the largest gatherings of the world food and meat trade, much of the hallway talk about ASF centered on these questions: How big is the shortfall? What will the consumption response be? How high will prices go? How big will imports be? How many countries in the regions will get afflicted by ASF?

What is known right now, Haggard said, is that April figures from China’s Ministry of Agriculture & Rural Affairs showed that sow numbers are down 22% and total inventory is down almost 21%.

“Those are already very large numbers,” he said.

Everyone is asking when the deficit is going to manifest, he added.

Import statistics during the first quarter showed an increase in beef, poultry and sheep meat imports, but pork imports went down.

“This is just part of the frustration being expressed by analysts and people in the meat trade again -- trying to figure out when this supposed hole will develop and then start to affect all protein supplies,” Haggard said.

For now, many of those questions will remain unanswered as the situation continues to unfold.

“There are all kinds of theories over the date on the supply hole; I can’t give you any definitive answer on when that might be,” Haggard said.

Then, there are the trade challenges that have largely weighed on the sector alone. During a conference call this week, Dan Halstrom, USMEF president and chief executive officer, said beef exports during the first quarter of 2019 were 307,000 metric tons, down about 3% from the same period last year. Export value, he noted, was $1.9 billion, down only slightly from last year.

“Considering all the noise out there on the trade front and some of these countries that have duties, we’re relatively encouraged by that performance,” he said, adding that there have been gains in key markets.

Switching to pork, Halstrom reported that first-quarter exports were 600,000 mt, down 6% year over year. Export value was $147 billion, down about 14%.

However, he said there was significant growth in medium-sized markets that are emerging, particularly the South American region, exports to which were up 41% as a whole.

The two markets most challenged were Mexico and Hong Kong/China, which was a result of the duties imposed on U.S. pork exports, he noted.

“In Mexico in the first quarter, we’ve seen a 29% decrease in value, equivalent to about a $110 million year-on-year decrease in value. A lot of this is attributable to the 20% duty that was leveraged against U.S. pork last summer,” Halstrom explained.

This has been a real focus for the industry and for USMEF, he added.

“We’re seeing share decline a bit year on year, to the tune of about 4%. We’re still the dominate supplier of imported pork into Mexico, but we have seen the share drop about 4%, to the advantage of some of our competitors (e.g., Canada and Europe),” he said. “We’re constantly trying to protect turf that’s ours, and Mexico and the whole [North American Free Trade Agreement] region, for that matter, would fall at the top of that list.”

Still, Halstrom said USMEF is encouraged by the recent developments, noting that the 20% duty Mexico lifted this week is “the best news we’ve heard in quite a long time.”

He added, “We’re very, very encouraged by that,” and thanked the Administration for “their tireless work” on hammering out an agreement.

USMEF is also hopeful this could leave to a swift passing of the new U.S.-Mexico-Canada Agreement.

First-quarter pork exports to China/Hong Kong were down 20% in volume and 34% lower in value, with a $88 million value difference from the same time frame last year.

“It’s hitting us on all fronts, but it’s really hitting us hard on the variety meat side," Halstrom said. "Pork variety meats are a specialty in China. [They] have huge demand, but we really are handicapped there with these duties.”

Regarding beef ti China/Hong Kong, Halstrom said export volume is down 34%, and value is 29% lower, with a $79 million value difference from last year.

“Obviously, there are a lot of moving parts when talking about China. You have the duty issue, you have African swine fever, you have a lot of other things going on in terms of the total China agreement that is being worked on diligently by our government,” he said.

The primary issue is uncertainty, Halstrom noted, adding, “That will probably continue for a time.”

“Hopefully, if we can get a trade deal consummated with China, it might clear up at least some of the uncertainty,” he said.

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