FEED Business Worldwide - August, 2011
America's swine sector looks to the east
by Eric J. BROOKS
Having only had a trade surplus in pork since 1995, America's swine industry is now export driven to the point that relatively bountiful domestic inventories are not denting prices, which are up strongly this year.
Since the year 2000, pork exports have increased by eleven times and this March saw 29.4% of America's pork output being shipped overseas, with volumes up by a whopping 40% from the same month last year. This is far ahead of the 23% to 25% of output exported that was being forecast by analysts just six months ago.
Lucky breaks in South Korea, Japan
Indeed with feed costs up sharply, pork exports have transformed what should have been a year of deep financial losses into prosperity. This can be seen in the US Meat Exporters Federation (USMEF) estimate that in March, pork exports added an equivalent value of $56.22 per live hog.
The stellar performance is due to both restructuring and good luck. South Korea's late 2010 and early 2011 foot-and-mouth disease epidemic boosted exports to that country, which is one of the world's top pork importers. In all, January to March South Korean imports totaled 73,905 metric tonnes and were valued at $175.9 million. This was 212% higher than in the same period last year.
In March alone, South Korea took 41,190 metric tons of US pork valued at$94.6 million. This volume was up four times higher than March 2010.
Moreover, if anything, this trend is set to continue: South Korea's devastating foot-and-mouth-disease (FMD) epidemic left the country acutely short of pork. Indeed, Korea's epidemic, was the last thing a country with swine feed costs 40% higher than the US and which imports nearly all its feed grain needed. So much so that as of mid June, at KRW 2,950/kg (US$2.66/kg), pork was selling at a higher price than beef at KWR 2,800 (US$2.52lg) in the country's supermarkets.
Indeed, South Korea is depending on American swine on more ways than one: America's Genesus is South Korea's largest supplier of breeding stock swine. It recently flew five plane loads of Yorkshire and Landrace breeding stock hogs to South Korea, as they are required to replace inventories wiped out by the country's FMD epidemic. Even so, South Korea's government estimates that it will be at least another 18 months before the country's hog inventories can be restored to their pre-outbreak levels.
Despite the exceptional first quarter performance in South Korea, the country's appetite for US pork is by no means topped out: Korea's first quarter red meat demand is traditionally slack. According to US MEF president Philip Seng, "Pork buying patterns in Korea tend to slow in the spring and US prices are traditionally higher in the summer, so we are focused on maintaining our momentum throughout the year."
Surprisingly, April then showed US pork exports to Korea up 150% by volume and 245% by value over the previous year's pace for the first four months of 2011. Even if this performance tapers off in the second half of the year, pork shipments to South Korea are on track to jump by at least several hundred percent.
Nor was South Korea's FMD crisis US pork's only lucky break: Overall first quarter US pork exports increased 18% in volume and 25% and in value over the first quarter of 2010. While it was a strong all-around performance, the gods were certainly on the side of US pork exports to North Asia.
Japan's tsunami and subsequent radioactive contamination of northern Japan's hog raising regions boosted US pork exports to that country by 31.7%. The trend appeared to be continuing in the months after the nuclear accident. With the Fukushima accident only disrupting Japanese livestock production in late March, Japan's imports of US pork had already increased 25% by volume and 24% by value.
With the US supplying approximately 46% of Japan's imported pork at this time, its imports of US pork can only rise as its late first quarter disasters either wiped out much hog production or left many of its swine contaminated to the point of being uneatable.
Good performance in Australia, Latin America & Canada
Indeed, while Korea and Japan stand out, American pork is doing well in many other markets too. Overall first quarter US pork exports increased 18% in volume and 25% and in value over the first quarter of 2010. Even here however, the gods were on the side of US pork exports to North Asia.
While China favours signing pork trade liberalization agreements with Brazil, neighbouring Hong Kong considers US pork to be of higher quality and upped its American pork import volume by 31.4% over the same period last year. Similarly, Russia's imports of US pork have doubled over the last year, even as its reliance on US chicken lessened.
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