Source: Tom Johnston, MEATINGPLACE, 5/21/19


The governments of Mexico and Canada on Monday officially announced the immediate removal of their respective retaliatory tariffs on U.S. pork and beef.

The move follows last week’s announcement by the Trump administration that it lifted U.S. tariffs imposed last summer on Mexican and Canadian steel and aluminum.

Mexico responded last summer with a 20% duty on most U.S. pork products, and Canada placed a 10% tax on U.S. beef.

The removal of all tariffs comes as a big relief to U.S. red meat exporters, who lost a lot of money over the last year. Pork producers, for example, were losing $12 per animal, or about $1.5 billion on an annualized industry-wide basis, due to Mexico’s tariff.

“Restoring duty-free access to the Mexican and Canadian markets is a tremendous breakthrough for the U.S. red meat industry,” said Dan Halstrom, president and CEO of the U.S. Meat Export Federation, in a statement.

Halstrom added that this also removes a significant obstacle for the U.S.-Mexico-Canada Agreement, “and USMEF is hopeful that all three countries ratify USMCA as soon as possible.”

Market analysis
Removal of the tariffs should prop up U.S. protein processors that will benefit not only from higher pork export prices but also potentially from increased chicken demand, Stephens Inc. equity analyst Ben Bienvenu said in a note to investors.

Tyson Foods, Pilgrim’s Pride Corp. and Sanderson Farms, in particular, should benefit from a potential reduction in excess domestic protein supply and an increase in realized prices for U.S. pork exported to Mexico. Higher pork prices in the U.S. and Mexico, then, could improve demand for chicken in both countries, Bienvenu explained.

Mexico is the largest export market for U.S. pork, accounting for 33.3% of total pork export volumes in 2018. Mexico purchased 734,481 metric tons of U.S. pork, or 6.1% of U.S. pork production, last year, even with 20% tariffs on most U.S. pork products that Mexico imposed in retaliation for U.S. tariffs on Mexican steel, according to Bienvenu.

U.S. pork volumes and values to Mexico were down 2% and 14%, respectively, year on year due to the tariffs, he noted.

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