High feed prices, low inventories, scientific disputes and a little bit of political protectionism have combined to slow exports of U.S. beef and pork from the blazing pace of the last several years. In its latest export outlook report, the U.S. Department of Agriculture says that slower but steady pattern will hold through Sept. 30, the end of the fiscal year.
The USDA says exports of livestock, dairy and poultry will be a record $30.1 billion — as it forecast three months ago. But within the broad category, the report said pork exports would total $5 billion — $300 million less than its previous estimate for the year. The decrease in value is based on smaller volumes shipped and lower prices, driven by weaker demand in Asia and Mexico and new phytosanitary restrictions in Russia.
The USDA raised its forecast for dairy products by $300 million, to $5.3 billion, based on stronger demand, a drought in Australia and New Zealand and lower production in the European Union. And despite new import restrictions by Russia, beef exports are expected to edge up in value to $5.1 billion because of improved market access in Hong Kong and Japan.
Overall meat exports to China (including pork, poultry, and lamb) grew 27 percent last year, according to Mario Moreno, chief economist for The Journal of Commerce. China still prohibits the import of U.S. beef, something President Obama asked his Chinese counterpart to overturn during trade talks in June. Moreno said China represented a 6.2 percent total meat market share for U.S. exports of beef, pork, chicken in 2012, up from 2.6 percent in 2010.
“Exports to that market jumped 157 percent in 2011 but the pace slowed to 23 percent in 2012,” Moreno said. “Demand for meat will stay strong as long as the incomes of millions in China continue rising.”
A merger proposal that stunned Wall Street could accelerate the pace of meat exports to China. In May, a Chinese company submitted a bid to buy Smithfield Foods for $4.7 billion. If approved by U.S. regulators, the takeover by Shuanghui International Holdings would be the largest Chinese purchase of a U.S. company on record.
Shuanghui is the largest pork producer in China and suffered a food safety scandal last year. That record had some critics blasting the proposal, saying unsafe Chinese pork could enter the U.S. food supply.
In fact, according to Rick Quinn of FDAimports.com, Shuanghui is not interested in selling pork to U.S. consumers. Instead, it’s eager to tie up a large supply of U.S. pork to improve its image in China.
Zhongpin Inc. is Shuanghui’s biggest mainland competitor. Although Shuanghui produces more pork annually, Zhongpin has worked for a decade to brand its pork products and built a massive cold chain for production and distribution. The company advertises its network of refrigerated warehouses and trucking companies as the key to delivering a safe food product to Chinese consumers.
The Smithfield Foods acquisition faces several hurdles in the U.S., but even if it is ultimately rejected, Smithfield has signaled it intends to dive more deeply into the export market. The Virginia-based company ranked 44th on the JOC's list of Top 100 Containerized U.S. Exporters for 2012, with nearly 31,000 TEUs.
Russia and Taiwan are among the countries that do not allow pork containing any trace of ractopamine to be imported. Ractopamine is a chemical feed additive designed to encourage lean muscle growth in animals, cutting the percentage of fat. U.S. industry and regulators point to international food safety bodies that have signed off on the use of ractopamine in raising hogs, cattle and turkeys. They argue that protectionism is at the root of the dispute, not food safety.
But as the number of markets eschewing ractopamine increases, Smithfield in late May said it was converting its production system, with half of its pork produced ractopamine-free. Once implemented, that would give Smithfield largely unfettered market access in Taiwan and Russia.
Contact Stephanie Nall at firstname.lastname@example.org.