Growth of the Meat Trade - USDA...Slide with Chart … and retaliatory tariffs; Vietnam as the...
Transcript of Growth of the Meat Trade - USDA...Slide with Chart … and retaliatory tariffs; Vietnam as the...
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Growth of the Meat Trade
Erin BorrorEconomist, USMEF
USDA Ag Outlook ForumFebruary 21, 2019Washington D.C.
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USMEF… and FAS PartnershipUSMEF’s Global Reach
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Driving the global meat trade
Pork• China & Vietnam – ASF & tariffs• Europe – ASF & Brexit • Mexico –tariffs • Japan – Japan-U.S. urgency
Beef• China • Global supplies – drought• Economic growth – demand • FTAs
Maximizing carcass values and adding value through the chain, from corn and soybean farmers to processors and exportersProviding customers around the world with
affordable, high quality red meat
Animal disease and tariffs…and demand
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Pork trade in the year of the pig• Global pork trade will set new records this year• The degree to which the U.S. benefits will depend largely on tariffs
Four key areas: • China & Vietnam – ASF & tariffs• Europe – ASF & Brexit • Mexico –tariffs • Japan – Japan-U.S. urgency
• Strong demand remains in the rest of world,But will be impacted by above & economy
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A 15% drop in China’s & Vietnam’s production means 7% decrease globally…back to 2010-11 levels
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ousa
nd m
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tons
Global Pork Production Others
Japan
Mexico
S. Korea
Philippines
Canada
Vietnam
Russia
Brazil
U.S.
EU
China
Source: USDA/FAS fall 2018 & USMEF estimates
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U.S. to continue to lead production growth for top exporters
Source: USDA/FAS fall 2018 & USMEF estimates
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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Thou
sand
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Pork Production for Top Exporters
European UnionUnited StatesBrazilCanadaMexicoChile
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In a scenario where China’s production drops by 15% (-8 million mt), exports to China could increase by +1.5 mmtMaximum increase is about 2.7 mmt –requires surge in U.S. pork
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Met
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Pork/pvm Exports to China/HK
ChileCanadaBrazilU.S.EU28
U.S. is best positioned to fill China’s shortfall but not with a 62% tariff
Source: GTA and USMEF estimates
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Driving global pork trade to a record 9-10 million mt … max is 11.5 mmt, +40%
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12,000,000
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Global Pork & Variety Meat Exports, annual
China
Mexico
Chile
Brazil
Canada
U.S.
EU28
Source: GTA and USMEF estimates
2019f is assuming a 15% drop in China’s production; would be similar to the shift in 2016 trade
+17%+18%
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Pork exports mostly flat outside China…Because growth across most markets has offset the loss of Russia & Ukraine buying
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2013 2014 2015 2016 2017 2018e 2019f
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Pork & Variety Meats to Rest of World ex China/HK
MexicoChileBrazilCanadaU.S.EU28
Source: GTA and USMEF estimates
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China already the largest importer of pork but growth last year was in the rest of the world
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Pork & variety meat imports from all suppliers
2013 2017 2018e
Source: GTA and USMEF estimates
Russia imports are now minimal
Expect continued growth in the major import markets, but could come down to price if China/global supply shortage materializes later this year
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Slide with ChartAs of January, hog prices reflected abundant supplies… and retaliatory tariffs; Vietnam as the exception
$0.00
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Japan Korea Vietnam Taiwan China Mexico EU Chile Brazil U.S. Canada
U.S
. $/lb
.
Estimated Carcass Prices
Jan 5yr avg Jan-18 Jan-19
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Slide with ChartU.S. futures now waiting for something more tangible? China March 1 Deal?
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Slide with ChartExpect continued market volatility
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Slide with ChartHog prices rebounding after CNY; spread narrows
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$0.20
$0.40
$0.60
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$1.00
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Ntl Avg Liaoning Henan Sichuan Guangdong Zhejiang
U.S
. $/p
ound
live
China’s Hog Prices in January 2019
5-Jan 12-Jan 19-Jan 26-Jan 2-Feb 9-Feb 16-Feb
+7% yoy
-10% yoy-9% yoy
+2%-6% yoy -4% yoy
First cases in Shandong, Guangxi, and Vietnam this week!
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Slide with ChartRecord chicken prices as pork substitute
43.8 40.635.7
10.51 8.93
9.00
3.84.1
4.2
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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019eKg
per
capi
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2019e shows 15% decrease in China’s pork production
China’s per capita consumption
Pork Poultry Beef
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ASF in Eastern EuropeEU ASF-infected countries= • 4.4 million mt pork • 50 mil head slaughter • 19% of EU 2017 production • Poland, Hungary & Belgium
are/were major pork exporters• Most major importers have not
recognized regionalization for ASF and impose country-wide import bans after findings
• Remains active in 2019
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Brexit and especially a Hard Brexit could impact over 1 million tons of pork trade
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UK pork imports UK pork exports
Met
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UK Pork Trade
2016 2017 2018e
Net UK imports from EU member states of about $2 billion
$2.5 billion
$610 million
Source: GTA and USMEF estimates
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U.S. pork industry expansion is built on export potential U.S. must be seen as reliable supplier again
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Billi
on U
SD
Met
ric T
ons
MT USDSource: USDA/FAS & USMEF; fall 2018 forecasts
Pork exports accounted for 22.4% of production and 25.7% when adding variety meats as compared to 22.2% and 26.5% last year.
Jan – Nov export value per head averaged $51.46/head, down $1.72/head or -3%
Down $9.58/ head for the month of Nov
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Top 2018 U.S. Export Growth Markets…the silver lining
-10,000
0
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70,000
Korea S.America
ASEAN Caribb. C.America
Aus/NZ Taiwan Japan Mexico TOTAL
Met
ric To
nsYear-over-Year U.S. Pork Export Growth
Jan - November
Source: USDA/FAS & USMEF
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Korea importing record volumes of pork; growing consumption & U.S. share
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2013 2014 2015 2016 2017 2018
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Korea’s Pork & Variety Meat Imports
MexicoChileCanadaUnited StatesEU-28
Total imports: 600,000 mt, +17%; U.S.: 212,000 mt, +30% U.S. market share increased from 31.6% to 35%
Source: GTA and USMEF estimates
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Slide with ChartKorea Meat – centric Home Meal Replacement
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Growth did not fully offset the dramatic slowdown to Mexico & China
-150,000
-100,000
-50,000
0
50,000
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150,000
Met
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Year-over-Year U.S. Pork Export Growth Jan – November 2017 and 2018
2017growth 2018growth
Source: USDA/FAS & USMEF
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Loss summary: impact of retaliatory duties following U.S. Section 232 (China & Mexico) & 301 tariffs (China)
• U.S. ham primal -19% or -$6.63 per head • U.S. picnic primal -22% or -$3.32 per head • Loss in ham + picnic value = -$9.95 per head• Front & hind feet & picnic hocks = -$1.80 per head• Hams + picnics + feet lost value = -$11.75 per head• $860 million loss when spread across June-Dec harvest
• SOME PACKERS ARE RENDERING CHINA PRODUCTS! • Lost market share & customer efforts to diversify • U.S. as a reliable supplier????
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U.S. beef is #1 on a $ basis and global beef trade set a new record in 2018 at >$38 Billion, up 9%
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U.S. Australia Brazil India NewZealand
Argentina Canada Uruguay EU28 Mexico Paraguay Nicaragua
Billi
on U
SD
Beef & Variety Meat Export Value, Billion USD
2016 2017 2018e
+7% +43% +12%
-12%
+9%+12%
+15%
+12%+8%
Source: GTA and USMEF estimates
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Overall beef export volume up 6% last year
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1,000,000
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9,000,000
2013 2014 2015 2016 2017 2018e
Met
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Beef & Variety Meat Export VolumeNicaragua
Belarus
Mexico
Paraguay
Uruguay
Canada
EU 28
Argentina
New Zealand
India
U.S.
Australia
Brazil
Source: GTA and USMEF estimates
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Driven largely by China’s buying
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Beef & Variety Meat Imports
2013 2017 2018e+50%
Source: GTA and USMEF estimates
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Beef exports to the China region are now double the volume imported into the U.S.
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1,000,000
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2,000,000
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Beef & Variety Meat Imports
2016 2017 2018e
+15%
Source: GTA and USMEF estimates
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South America dominating China’s imports, accounting for ~70%
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2011 2012 2013 2014 2015 2016 2017 2018
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China’s Beef Imports
OthersCanadaArgentinaNew ZealandAustraliaUruguayBrazil
Source: Global Trade Atlas, USMEF
+50%
+19%
Grain-fed increases to around 6% or 70,000 mt
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Australia shipping more grain-fed to China, even with limited plants approved
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Japan Korea China EU U.S. HK Taiwan
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Australia’s grain-fed exports to top markets
2016 2017 2018
+8%
+15%+87%
-20% -25% -9% -28%
2018 main markets ~280,000 mt, +13%Source: MLA, USMEF estimates
But weather continues to limit Australia’s herd expansion
Tariff advantages Aus vs. U.S.: Japan 27.5% vs. 38.5%Korea 24% vs. 18.7%China 6% vs. 37%
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China accounting for 80% of the increase in beef trade
(200,000)
(100,000)
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owth
The tonnage change in 2018 beef/bvm import volume
2018e import growth
Source: GTA and USMEF estimates
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But the growth for U.S. beef has been led by Korea, Japan, Taiwan & ASEAN
-20,000
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owth
Jan-Nov 2017 and 2018 growth year-over-year in U.S. beef/bvm exports
2017growth 2018growth
Source: GTA and USMEF estimates
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Underpinned by growing consumption…
Per Capita Consumption
(2016 and 2018est)
U.S. Share of Total Beef Consumption (2016 and 2018est)
Japan 6.7 kg to 7.5 kg 23% to 27%Korea 11.5 kg to 12.5 kg 27% to 33%Taiwan 4.67 kg to 5.35 kg 38% to 42%ChinaHK
4.2 kg to 4.33 kg 2%17% to 18%
Mexico 14 kg to 14.15 kg 9%Canada 18.4 kg to 18.9 kg 15%
Source: USDA/FAS, GTA & USMEF estimates
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U.S. beef and variety meat exports set a new record in 2018…growth to continue
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Billi
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MT USDSource: USDA/FAS & USMEF
2018e: 1.35 mmt, +7% $8.3 Billion, +15% >Jan – Nov
beef export value per head averaged $320.72, up $38.38 or +14%. >Beef exports accounted for 11.1% of production and 13.4% when adding variety meatsup from 10.3% and 12.8% last year.
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Summary • It will be another wild year, with trade driven by forces out of our control:
disease and tariffs • U.S. maintains supply advantage • U.S. red meat exports will again be record-large, barring our own crisis • Degree to which U.S. is able to supply the world depends on trade policy• All meat producers globally are looking to sell more to China• China’s pork supply “hole” will be partly offset by reduced consumption and
larger imports of pork, poultry, beef, sheep- the big import surge might not happen until late 2019-2020
• Mexico’s domestic pork industry is growing • Japan’s imports will continue to set new records, with growth going to our
competitors until a U.S.-Japan trade agreement happens• Longer-term potential is significant, as U.S. has the production base & natural
resource advantages but must also have partnerships and trade agreements• Opportunities for more branded and value-added products?
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EXTRAS
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• Growth of Meat Trade 15 minutes
• Over the past 10 years, global exports of beef and pork have increased by more than one-third, supported by economic growth and an expanding middle class. Although demand is growing in most regions, much of the increase in exports is due to surging demand from China. During the same period, Russia drastically reduced imports of beef and pork, increasing competition for markets in Asia. This speaker will discuss expansion in red meat trade, focusing on future opportunities and challenges to growth.
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South America’s reliance on ChinaAccounts for >50% of Arg. & Ur. exports
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
Brazil Argentina Uruguay Australia U.S. New Zealand
Met
ric to
ns
Exports to China/HK and to the Rest of the World, 2018
China/HK ROW
Source: GTA and USMEF estimates
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U.S. and Brazil leading the growth in beef production for top exporters
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2109F
Thou
s m
etric
tons
Beef Production, Top Exporters
Nicaragua
Belarus
Uruguay
New Zealand
Paraguay
Canada
Mexico
Australia
Argentina
India
European Union
Brazil
United States
+2.5%+1.1%
Source: USDA/FAS fall 2018, USMEF estimates
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Drives a 10%-15% increase in total U.S. exports vs. 5% baseline forecast
• The increase to China is 1.5 million mt, of which 900k mt can come from the EU
• Drives EU exports to 4.45 million mt, +27% • Canada’s growth could be constrained
• And the hedge against EU ASF … favors U.S. growth • Latin America • Korea, Japan • Southeast Asia • U.S. 2019 export potential scenario… 2.75 million mt, +15% • It’s going to come down to tariffs and prices.
*does not include HS 0504 variety meats
>>Retaliatory tariffs continue to limit U.S. export opportunities in China and Mexico >>The “hole” in China’s supplies might not materialize until later in 2019, with a more significant import surge in 2020
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Booming Aussie grain-fed exports…weather continues to limit overall production expansion
• 2018 CY grain-fed exports >280,000 mt, accounting for a quarter of Australia’s total exports and a new record
• Japan: up 8% to 153,000 mt (48% of exports to Japan) • Korea: up 15% to 57,600 mt (34%) • China: up 87% to 49,470 mt (30%)
Source: MLA
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Slide with ChartChina’s situation
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Transportation of pork in China~ Boyar estimates
Yunnan1100
Sichuan-1150
Chongqing-870
Guizhou-190
Guangxi140
Guangdong-4480
Fujian-630
Jiangxi590
Zhejiang-2070
Jiangsu-1730Anhui
400
Liaoning760
Hebei930
Shandong1360
Henan2410
Hubei1120
Hunan1200
Beijing -580Tianjin -390
Heilongjiang580
Jilin660
Inner Mongolia60
Shanxi-60
Shaanxi40
Ningxia-10
Gansu-70
Qinghai-30
Tibet-30
Sinkiang170
Import >100In Balance: --100~100Export: 100~490Export: 500~990Export: > 1000Unit: 1,000 MT
Hainan-90
In 2017, there were 16 provinces transported pork out of the province, a total of 11.53 million MT.
There were 15 provinces transported pork into the province, a total of 13.54 million.
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Slide with ChartChina’s hog prices low goinginto Chinese New Year
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Slide with Chart
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EU exports continued to grow, without access to Russia and despite ASF
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
2013 2014 2015 2016 2017 2018e
Met
ric to
ns
EU pork & pork variety meat exports to top markets
Others
Russia
Taiwan
Australia
United States
Hong Kong
Korea, South
ASEAN
Japan
China
Source: GTA and USMEF estimates
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Especially to Asia…they remain key supplier to China and China is by far their biggest market
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
China Japan ASEAN Korea,South
Hong Kong UnitedStates
Australia Taiwan Russia Others
Met
ric to
ns
EU pork & pork variety meat exports to top markets
2013 2014 2015 2016 2017 2018e
Source: GTA and USMEF estimates
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EU pig prices remain low…waiting for the China buying• With sharp increase in pork
production (Jan-Oct 2018 +2.7%)• Sluggish intra-EU demand and
relatively steady exports
Risks for their production: • ASF, high feed prices, low hog prices• 2019F is for steady production
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A bit of a rebound in EU piglet prices
US$48/head
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Canada’s exports slow to China & U.S. but growth to Japan, Mexico, elsewhere in Asia
-11%
-11%
+7%
+23%
-1% +31% +20%
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
China, HongKong
United States Japan Mexico Taiwan S. Korea Philippines Others
Met
ric To
ns
Canada’s pork & variety meat exports
2013 2014 2015 2016 2017 2018e
Source: GTA
2018: 1.15 MMT, -2.5%
China/HK accounted for 24% of Canada export volume, down from 29% in 2016
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Mexico’s pork imports record-large again
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
2013 2014 2015 2016 2017 2018e
Met
ric to
ns
Exports of pork/pvm to Mexico
EU28ChileCanadaU.S.
U.S. includes HS 0504 variety meats
U.S. market share dropped from 87% to 85%
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Mexico’s hog prices have remained strong
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
Jan-
08M
ay-0
8Se
p-08
Jan-
09M
ay-0
9Se
p-09
Jan-
10M
ay-1
0Se
p-10
Jan-
11M
ay-1
1Se
p-11
Jan-
12M
ay-1
2Se
p-12
Jan-
13M
ay-1
3Se
p-13
Jan-
14M
ay-1
4Se
p-14
Jan-
15M
ay-1
5Se
p-15
Jan-
16M
ay-1
6Se
p-16
Jan-
17M
ay-1
7Se
p-17
Jan-
18M
ay-1
8Se
p-18
U.S
. $/l
b
Live Hog Prices in Mexico & U.S.Through Dec 2018
Mexico U.S.
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With a strong finish to 2018 as tariffs remained on U.S. pork
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Mexico’s efforts to diversify suppliers
0
2,000
4,000
6,000
8,000
10,000
12,000
Met
ric to
ns
Pork exports to Mexico, excluding variety meats
Canada EU
TRQ use: 6,430 mt/ 350,000 mt
Canada
EU
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Growth in Mexico’s pork exports…CPTPP
Source: Global Trade Atlas
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
2013 2014 2015 2016 2017 2018e
Met
ric to
ns
Mexico’s Annual Exports, including variety meats
Others
Canada
China
S. Korea
U.S.
Japan
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U.S. - Japan trade agreement • Urgency: all is not yet lost, but we are now way behind• Japanese market booming / in transition • Companies looking to invest for future – noting decrease in
Japanese production expected, high labor costs, etc. • Expect continued growth in Japanese red meat consumption and
imports accounting for a larger share of the market • Need assurance that U.S. will be FTA/TAG partner soon • What is the reality for rapid progress / agreement scope? • Exporter priorities conveyed to USTR= level playing field ASAP • Near-term loss estimates: $600 million pork and $550 million beef
… lost opportunities exceed $1 billion each in 10 years• http://www.usmef.org/usmef-assesses-potential-pork-and-beef-
industry-losses-due-to-japans-preferential-trade-agreements/
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“Niku Boom” Japan imports record volumes of pork (>$5 billion)
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
2013 2014 2015 2016 2017 2018
Met
ric to
ns
Japan’s Pork & Variety Meat Imports
OthersChileMexicoCanadaEU-28United States
Total imports: 1.16 mil mt, +0.5%; U.S.: 407,000 mt, steady U.S. market share held at 35%
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Japan’s imports of U.S. pork
-
50,000
100,000
150,000
200,000
250,000
chilled frozen gsp other processed
Met
ric to
ns
Japan’s U.S. pork imports by category
2010 2011 2012 2013 2014 2015 2016 2017 2018
Tariffs on competitor’s
processed pork phasing to zero
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Canadian pork gaining chilled market share
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
20%
30%
40%
50%
60%
70%
80%
2011 2012 2013 2014 2015 2016 2017 2018f
Met
ric T
ons
Mar
ket S
hare
Japan’s Chilled Pork Imports
TTL Imports Canada U.S.Source: MAFF
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Initial tariff reductions on implementation (Dec 30 for CPTPP and Feb 1 for EU) and again at start of JFY, April 1, 2019
4.30%
20.00%
10.00%
9%
2.20%
16.60%
8.30%
4.30%
1.96%
13.30%
6.60%
4.30%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Chilled/frozen pork Prepared pork Sausages Ham & Bacon
Ad v
alor
em d
uty
Japan’s Tariffs on Pork Imports
U.S. CPTPP & EU Implementation CPTPP & EU April 1, 2019
Zero by 2023
Zero by 2028
Source: USMEF and agreement text
Tariffs are eliminated by 2023 for prepared pork & sausages; and by 2027-2028 for chilled/frozen pork and ham & bacon
Zero by 2027
Zero by 2023
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0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
Met
ric to
ns
Japan’s imports of ground seasoned pork
Others
Chile
Mexico
Canada
EU-28
UnitedStates
EU market share has increased to 18%
Record-large GSP imports, driven by EU, Mexico, Chile, Canada …FTA partners
Source: MAFF
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Korea producing & importing more porkmost imports duty-free
0%
10%
20%
30%
40%
50%
60%
70%
80%
0100200300400500600700800900
1000
Thou
smet
ric to
ns
Korea’s Pork Situation
Dom production Imports U.S. SS rate
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Slide with ChartMany variables impacting U.S. hog pricesCrisis = opportunity?
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Europe’s cases mostly in wild boar; Romania most active in domestic, backyard & large farms
1,163
109 105 51 10170
2,438
41
1,443
161 138
685
0
500
1,000
1,500
2,000
2,500
3,000
Romania Poland Ukraine Lithuania Belgium Hungary Latvia
case
s
Cases of ASF in European Countries in 2018
Domestic Wild boar
Jan: 22 domestic; 44 wild boar
Jan: 1 domestic; 223 wild boar
Jan: 67 wild Jan: 95 wild Jan: 70 wildJan: 67 wildJan: 2 domestic
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Europe’s big exporters
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
Germany Spain Denmark Netherlands Poland France UK Ireland Hungary Others
Met
ric to
ns
EU pork & variety meat exports to third countries
2013 2014 2015 2016 2017 2018e
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Europe’s big exporters mostly producing more pork, except Germany
0
1,000
2,000
3,000
4,000
5,000
6,000
Germany Spain Denmark Netherlands Poland France UK Ireland Hungary Others
Thou
s met
ric to
ns
EU pork production by top exporters
2013 2014 2015 2016 2017 2018e
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Australia cattle on feed set new record• COF to a record 1.13 mil head (Q3 2018) • Dry pastures and strong Asian market
demand for grain-fed beef • 2017-18 feedlot marketings were a record
2.83 mil head• Total slaughter in 2019 estimated at 7.6 mil
head, -3%; (following +9% in 2018) • Production 2019 est. at 2.2 mmt, -4%• Significant female slaughter (+22%) means
smaller breeding herd. • Feed stockpiles depleted and better than
average Northern wet season needed • Wheat A$432/mt, +36% yoy while grain-
fed cattle prices were below year-ago in Q3
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Australia’s chilled/frozen beef exports up 12%
• Total 1.125 mmt, +11% or +110,000 mt• But still 20,000 mt below the 5-year
• 2019F: 1.03 mmt, -8% (watch MLA update in late Jan)