Source: Lisa M. Keefe, MEATINGPLACE, 3/23/18


Further analysis of the effects of retaliatory tariffs imposed by the Chinese government on agricultural products, including pork, paints a negative picture, but not quite so negative as the likely fallout first appeared.

President Donald Trump on Thursday signed a memorandum directing U.S. Trade Representative Robert Lighthizer to place tariffs on about $60 billion of Chinese goods. In turn, China’s Commerce Ministry released a list of more than 120 U.S. products targeted for tariffs if the two countries fail to resolve their trade differences, a list that threatened a 25 percent tariff on pork, among other items.

However, any measures first have to be reviewed by the World Trade Organization, in a 30-day period of consultations, before the first set of tariffs can be imposed.

Meanwhile, noted Farha Aslam, equity analyst for Stephens Inc., exports of pork products to China, while sizable, represent only about 2.4 percent of total U.S. pork production. Total U.S. pork exports were 19.0 percent of production in 2017, and China represented 12.5 percent of that.

Exports falling anyway
Exports to that country were expected to fall in 2018 anyway, due to significantly higher production in China, and a bottleneck forming in the U.S. at the processing level where labor issues are limiting pork processors’ ability to keep up with record-setting hog production levels.

Still, no tariff in this case is a good tariff, and the Daily Livestock Report said the news is particularly bad for U.S. pork variety meats, about of third of which go to China. The variety meat sales are important for maintaining the value of the overall carcass.

Overall hog carcass values will have to fall in order to remain competitive with the price of pork exported from the European Union, especially if U.S. exports are saddled with an extra 25 percent tariff, the DLR noted.

As pork also is an issue in the ongoing negotiations with Mexico over the revamp and renewal of the North American Free Trade Agreement, the possibility of tariffs on export to China represents a kind of one-two punch for the industry.

In the stock markets, Aslam noted that the tit-for-tat tariffs proposals are generally good for investors in Hormel and Tyson, which export little to no product to China. The stock price of Smithfield’s Chinese owner, WH Group, however took an immediate hit on the back-to-back announcements in the U.S. and China, even as other China-based pork producers saw their stock prices soar.

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