The data released by the US Department of Agriculture last week showed that tariffs are starting to impact American meat exports, with China canceling orders for 12,000 metric tons of American pork, setting a record since 2020. Erin Borror, vice president of the US Meat Export Federation (USMEF), stated that these pork products were specifically produced and labeled for China, making it difficult to reallocate them to other markets. Additionally, China has a high demand for pig offal and other by-products, which other markets cannot fully replace.
USMEF pointed out that due to China's retaliatory actions against American "reciprocal tariffs," the effective tariff rate on American pork and its by-products has reached 172%, while the tariff rates on American beef and its by-products have also reached as high as 147%. Brett Stuart, founder of agricultural trade company Global AgriTrends and economist, noted that under the current tariff structure, the Chinese market is essentially closed to the American pig, cattle, and poultry industries.
Borror noted that these American pork products exported to China were specifically produced and labeled for China, making it more difficult to reroute after the cancellation of orders. These are products without ractopamine, and the packaging bags and boxes are printed with Chinese labels. Given the high production costs and the fact that they were specifically designed for China, it is challenging to reallocate them to other markets. Moreover, China has unique product demands that other markets cannot fully replace.
Data shows that China is the main buyer of pig by-products such as pig offal. Borror estimates that if the Chinese market is lost, each pig could lose about $8 to $10 in revenue from by-products, with total annual losses potentially reaching $1 billion.
Stuart believes that usually when one market slows down or closes, another market will step in to rebalance. However, China is an exception. The uniqueness of China lies in the products they purchase—things like pig neck bones, pig heads, pig feet, pig tails, pig intestines, and various other offal products. China is actually the only market that accepts these items. "The question is, how do exporters now handle these products?"
Although some of these products may be returned for use as feed, Stuart said that this price is far lower than what they would receive by exporting to China. He pointed out that this situation hits the slaughter industry's profit margins the hardest, as the decline in the prices of these by-products directly affects their profits.
Last week, China canceled American pork orders totaling 12,000 metric tons, setting a record since 2020. The image shows imported American pork stored in a refrigerated warehouse in Shanghai. (Bloomberg)
However, Stuart believes that this incident is not enough to destroy the American pork market, but it will compress the profit margins for slaughter and processing operators and may have a chain reaction reflected in live hog prices. Looking ahead, Stuart said that the American pork industry has reason to remain optimistic, as the recent increase in hog futures prices indicates that this year will be quite good for American pork producers.
"Our pork exports haven't reached a full collapse yet," Stuart said. "There is still strong demand in the market, and we are very competitive in terms of production costs. I am confident that we will see some new trade agreements in the next 2 to 3 months." Stuart also expressed hope for further opening up the Vietnamese and Philippine markets, including possible negotiations with Australia regarding its cooking requirements for American pork.
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