May 20, 2004

Foreign Demand For US Pork On Fire

USDA, in their latest Livestock, Dairy and Poultry Outlook said foreign demand for U.S. pork products is on fire. The U.S. pork industry exported 523 million pounds of product in the first-quarter of 2004, almost 19 percent greater than in the same period last year.

"As usual, Japan, Mexico, and Canada accounted for almost 78 percent of first-quarter shipments," they add. "Two factors explain the surge in U.S. pork exports: closure of important foreign markets to U.S. and Canadian beef products, and the value of the U.S. dollar, which has depreciated significantly in terms of important foreign currencies."

USDA says exports to Japan and Taiwan increased 7 percent and 153 percent over first quarter 2003. "Closure of these markets to U.S. and Canadian beef products explains part of the increase. Although not a perfect substitute, pork can replace beef, to some degree, on restaurant and home menus," they add. "The depreciated value of the U.S. dollar makes dollar denominated pork products relatively cheaper, compared with products valued in Canadian dollars and Danish krone. Also, with respect to the Japanese market, the anticipated lifting of the Safeguard--a mechanism that increases the minimum import price of imported pork products-on April 1 was likely another factor that increased U.S. pork exports to Japan."

USDA says Mexico imported 126 million pounds of U.S. pork in the first quarter, an increase of 88 percent over the first quarter last year. Although Mexico has begun the process of re-opening markets to some U.S. beef products, much of the first quarter increase in U.S. pork exports to Mexico is likely attributable to Mexican buyers substituting for beef, they add.

"Although Canada is a major pork producer and exporter, its imports of U.S. pork products were 31 percent greater than a year ago. The exchange rate is likely a major explanatory factor. The stronger Canadian dollar and an international border that is relatively open to trade allow an integrated North American pork industry to source favorably priced pork products in the United States for sale to Canadian consumers," they add.

USDA says another factor in increased U.S. exports to Canada - despite Canada being the world¡¯s second largest pork exporter last year - is the "nonhomogeneity" of the commodity referred to generally as "pork". In fact, pork is a collective term used to describe the set of cuts produced when a hog is slaughtered and butchered: loins, butts, picnics, ribs, bellies, and trim, etc.

"It is likely that at any one point in time, a particular market in Canada is surplus or deficit in one particular pork cut. The likelihood is that U.S. packers had adequate supplies of a particular pork cut to sell at the same time the Canadian market was deficit in that cut. The depreciated value of the dollar likely made the transaction more attractive to Canadian buyers," they add.

USDA says current expectations are for the export momentum that started off the year will continue through 2005. "U.S. pork exports are likely to exceed 1.9 billion pounds this year-an increase of more than 13 percent over 2003 - and are expected to break the 2- billion-pound mark in 2005," they add.

Source: USDA