Mon, 11 Jun 2018
Speaking live from the 2018 World Pork Expo in Des Moines, Iowa, Jim Long, president and CEO of Genesus, shares his international view of pig prices and demand along with the impact of tariffs on US pork
"China's the number one market, the largest producer in the world, and the biggest importing market. The situation right now in China is the average producer is losing about US$30 per head. So, in my mind that's a reflection that they've got quite a bit of supply," said Long.
"The expansion that's been underway in China has increased production and made more pigs available. If you take that number, US$30 per head, that means the (Chinese) industry, on average, is losing US$350 to US$450 million per week. So, the demand for pork for import obviously will not be as intense as it's been in the past because they have more pork."
Regarding US trade negotiations with China, Long said the Chinese government knows where sensitive areas are to affect American business and public opinion.
"Pork producers were very strong supporters of President Trump in the last election and still are," he said. "The Chinese, I think, one of the reasons they have the opportunity to put the tariff on right now is they aren't really looking for a lot of pork because their profitability is down, so there's a little bit of both. But I think it's like everything else - it's negotiable."
He said it's similar to the Mexican tariff that was recently announced but isn't expected to be implemented until December, which is after the US congressional elections.
"They're obviously giving a six-month window for further negotiations before the tariffs would be implemented," Long noted.
In Russia, expansion is underway, and the market is profitable.
"One of the key parts in Russia is that they have basically stopped pork from being imported from any country in the world," said Long. "So, what that has done is it has been very supportive to domestic producers."
Long said he's not certain but believes it's part of the government strategy to push to more self-sufficiency.
"One way to expand is to have producers make lots of money. So they have money to invest, and it gives confidence to invest. But, I believe long-term Russia will never be a key market for Europe in the future," he said.
Europe's production is fairly steady with some countries' numbers up and some down. Long expects they'll be affected tremendously by the China market because it's their primary export market.
"I just returned from Europe; producers have a lot of pressure from animal welfare," he said. "There's certainly discussion that maybe tail docking will be stopped in the near future and castration. These things are all implications on production and will probably continue at an increased cost of production for European producers."
When asked if he expects similar regulations to come to the US and North America, Long said yes, it's likely, but he's not sure how fast it will happen.
"But all the consumer pressures and welfare pressures will continually be brought to the US overtime," Long noted.
The Mexican swine market has been very profitable for producers over the last three years. The industry has been challenged by high levels of porcine epidemic diarrhea virus (PEDV), which has eroded production.
"It's what has partially supported the prices, and we see expansion in Mexico," he said. "If the tariff goes in place, that'll be positive for Mexican producers, but I imagine by December there'll be some resolution that will stop that from happening."
Long said PEDV appears to be chronic in Mexico which may be due to the warmer climate and lack of seasonal cooling that Canada and much of the US experience.
World Pork Expo is the world's largest pork-specific trade show and is presented by US-based National Pork Producers Council. About 20,000 producers, employees, industry specialists and other pork professionals, including 1,000 international visitors, participate in the three-day event.