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U.S. Pork Value Squeezed by Higher Duties
USAgNet - 09/07/2018

July exports of U.S. pork and beef were higher than a year ago, according to data released by USDA and compiled by the U.S. Meat Export Federation. Export value results were mixed, with beef exports posting another near-record month while pork export value declined, reflecting the impact of retaliatory duties imposed by Mexico and China.

Pork exports totaled 176,413 metric tons (mt) in July, up 1.5 percent from a year ago, valued at $465.3 million -- down 5 percent year-over-year and the lowest monthly value since February 2016. For the first seven months of the year, pork exports remained 2 percent ahead of last year's record volume pace at 1.45 million mt, while value was up 3 percent to $3.83 billion.

"It is encouraging to see pork export volume continue to grow, even in the face of considerable headwinds in some of our most critical markets," said USMEF President and CEO Dan Halstrom. "But as anticipated, the 20 percent duty in Mexico and 62 percent duty in China weigh heavily on the price these exports can command and on the returns generated for producers and for everyone in the U.S. supply chain. Buyers outside of Mexico and China have stepped up to purchase our product, which is fantastic. But they are capitalizing on a buying opportunity made possible by the higher costs of doing business in Mexico and China."

July exports accounted for 24.7 percent of total pork production and 21.7 percent for muscle cuts only, down from 25.9 percent and 21.3 percent, respectively, last year. For January through July, the percentage of total pork production exported fell from 27.5 to 27 percent, but for muscle cuts the percentage increased from 22.8 to 23.3 percent. July pork export value averaged $48.49 per head slaughtered, down 11 percent from a year ago. Through July, per-head export value was up slightly to $54.27.

Led by another spectacular performance in South Korea and strong growth in Japan, Taiwan and Latin America, July beef exports climbed 12 percent in volume to 116,575 mt, valued at $722 million -- up 16 percent from a year ago and just slightly below the May 2018 record of $722.1 million. For January through July, beef exports established a record pace in both volume (779,450 mt, up 10 percent year-over-year) and value ($4.76 billion, up 20 percent).

July exports accounted for 14 percent of total beef production and 11.8 percent for muscle cuts only (the highest since December 2016) -- each up nearly a full percentage point from a year ago. For January through July, exports accounted for 13.5 percent of total beef production and 11.1 percent for muscle cuts -- up from 12.8 percent and 10.1 percent, respectively, last year. Beef export value averaged $326.18 per head of fed slaughter in July, up 9 percent from a year ago. Through July, per-head export value was up 16 percent to $318.31.

"The worldwide momentum for U.S. beef has rarely been as strong as it is today," Halstrom said. "To a large degree our mainstay Asian markets are driving this growth, but emerging markets in Asia and in the Western Hemisphere are also displaying a tremendous appetite for U.S. beef and contributing significantly to the surge in export value. From high-end restaurants to convenience stores, U.S. beef is gaining new fans across the globe on a daily basis."

The duty rate on most U.S. pork entering Mexico increased from zero to 10 percent in early June and from 10 to 20 percent in early July. This took a toll on July exports to Mexico, especially in terms of value. July volume was 56,484 mt, down just 4 percent from a year ago. But pork moved south at lower prices, with value falling 25 percent to $92 million.

In China, the duty rate on U.S. pork and pork variety meat increased from 12 to 37 percent on April 1, and to 62 percent on July 6. July exports to the China/Hong Kong region totaled 22,199 mt, down 31 percent from a year ago, while value dropped 19 percent to $55.9 million. Pork variety meat volume to China was hit especially hard in July, dropping 49 percent from a year ago to 7,446 mt. For January through July, pork and pork variety exports to China/Hong Kong dropped 22 percent year-over-year in volume (238,207 mt) and 10 percent in value ($563 million) -- due in part to the higher duty rates, but also due to an upward trend in China's domestic pork production.

The July export picture was much brighter in other major markets -- including Japan, the leading value destination for U.S. pork. Exports to Japan totaled 31,248 mt in July, up 10 percent from a year ago, while value climbed 6 percent to $127.2 million. For January through July, exports to Japan were 1 percent ahead of last year's pace in volume (230,315 mt) and 2 percent higher in value ($948.6 million). This included a 2 percent decline in chilled pork exports to 120,288 mt, though chilled pork value increased 1 percent to $580.4 million.

U.S. beef exports to Japan hit a post-BSE volume high in July, reaching 31,883 mt (up 15 percent from a year ago) valued at $196.3 million (up 12 percent). For January through July, exports were up 7 percent in volume (191,237 mt) and 12 percent in value ($1.21 billion). This included a 4 percent increase in chilled beef exports to 87,034 mt valued at $694.9 million (up 13 percent). U.S. beef has captured 50 percent of Japan's chilled import market this year, down slightly from a year ago.

Beef export growth to Korea continued at a remarkable pace in July, with volume up 51 percent from a year ago to 23,614 mt and value soaring 66 percent to $169.2 million. This shattered the previous monthly value record of $154.8 million, set in June 2018. For January through July, exports to Korea jumped 38 percent to 136,897 mt, valued at $971.2 million (up 54 percent). This included a 33 percent increase in chilled beef exports to 29,923 mt, valued at $289.2 million (up 45 percent). U.S. beef has accounted for 58 percent of Korea's chilled beef imports this year and 53 percent of the chilled/frozen total (up from 54 percent and 47 percent, respectively, during the same period last year). Australia is expected to trigger its beef safeguard in the coming weeks, resulting in a temporary tariff rate increase agreed to in the Korea-Australia Free Trade Agreement. This could further strengthen momentum for U.S. chilled beef to Korea through the end of this year.

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