September 28, 2016

U.S. Pork in the Global Market &

Outlook

A Lost Message in Our Noisy Media• The U.S. has a massive, globally competitive

manufacturing sector• This sector had a $178 billion U.S. trade surplus over the

past 5 years• This manufacturing sector produces virtually zero waste

and is a model of ‘sustainability’• It cannot be outsourced

– This sector is broadly more competitive than any country on earth

– It is “land-based”• U.S. farmers and ranchers produce the safest, most

affordable food on earth

Source: FRED, U.S. Federal Reserve Bank

Why Trade?• Theory of trade: Produce what you do the best,

and trade for the rest (bananas, coffee)• Maximum value: The “Exploding Carcass”

– Match products with consumers ($575 million in offal exports in 2017; feet to Asia, rinds to Mexico)

• Trade is a two-way street– U.S. pork imports: 94 mil lbs/mo– U.S. pork exports: 417 mil lbs/mo– Should we fear imports?

• Only if we are not competitive…

• What is the net benefit of trade?

Source: US Dept of Commerce

U.S. Agriculture Trade

Three Questions

Globalization: Friend or Foe?Free Trade Agreements?

Is China the Market of the Future?

Globalization: Friend or Foe?• If you’re a Japanese hog farmer: Foe• If you’re a Japanese pork consumer: Friend• If you’re a U.S. hog farmer: Friend• Get my point?Is U.S. ag competitive globally? YES

– Grain, beef (grain-fed), pork, poultry (cheapest on earth), dairy

• Two risks:– Increasing U.S. regulations, (cost increases)– Lack of FTA access (no deals)

Free Trade Agreements?• Have fueled U.S. agriculture for decades

– Ag duties among the highest globally; meat duties are highest

• But… of the last 100 FTAs, the U.S. has been a party to 2

• We must do better (seeking, negotiating, enforcing)

• TPP: half of the Japanese beef market is at risk (over the next 10 years)

Source: USDA/FAS

Is China the “Market of the Future?”

1. Mexico2. Canada3. Japan4. China

Source: GTIS, AgriTrends

Is China the “Market of the Future?”

Oh, and one other thing…

Enemies at home, and abroad…

 “We think it’s better to price meats earlier in the chain, it’s easier,” - Dr. Maarten Hajer

Global Livestock Industry Must Unite Around a Consistent

Message

“It is socially irresponsible to legislate yield-reducing practices”

“Nearly a billion of our common population is food insecure; now is NOT the time to legislate

regulations that raise costs and reduce supplies”

Pork Market Outlook

• Macro Factors• Global Pork 2017• U.S. Pork 2017

Source: IMF July 2016 Outlook

Source: USDA, Fed Reserve

Source: UN/FAO

Source: UN/FAO

Source: NYMEX, FAO

Source: various sources, Warren Prosser

Global Pork 2017

Global Meat is Diverse & ComplexGlobal meat trade is a complicated web of politics, culture, and economics (in that order!)

– Perishability– Bio-safety– Fragmented markets– Politically sensitive– Culturally diverse

Seoul, Korea – Riots against U.S. beef, June 2008

60 million peasant farmers raise 40% of China’s pigs (half of the worlds pigs in China)

85% of U.S. chicken “paws” are eaten in China (for higher prices than leg quarters)

Source: Various global sources, USDA

Source: USDA, Fed Reserve

Cheaper U.S. Pork = Better Exports?

PEDV USD rally

China Pork• Market still HOT on tight supplies; liquidation

of 2+ mil sows (but not 13 million)• Hog and piglet prices posted RECORD HIGHS• Imports SURGING • Profits above US$170+/head (6 months)

– Expansion occurring– But longer lag than U.S.

• Corn policy adjustments: cheaper corn ahead– 250 mmt (9 bil bu) in storage

China Pork• Data is limited• Big question: Expansion???

China MOAAgriTrends average of Chinese market reports

Source: China Customs

Source: China and Hong Kong customs data, includes variety meats, Agritrends forecasts

Source: BPEX, USDA, U.S. Fed, AgriTrends

Source: BPEX, USDA, U.S. Fed, AgriTrends

Source: BPEX, USDA, U.S. Fed, AgriTrends

U.S. Pork Exports 2017

Source: USDA/ERS, AgriTrends Forecasts

Source: USDA/ERS, AgriTrends Forecasts

Source: WASDE, AgriTrends forecasts

Source: USDA/FAS

How Much is TOO Much?

Source: USDA, WASDE Forecasts

Source: USDA, CME

Global Food Demand

• +78 million people per year (global growth)• Global middle class to rise from 2 billion to

4.9 billion by 2030– Asia driving global food demand– But also, less-developed nations

globally– New opportunities for further-

processed and consumer-ready food products

Denver, Colorado

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Thank You

Brett Stuartbstuart@globalagritrends.com

303-803-8716@agritrends

www.globalagritrends.com