More pigs in the US inventory means more problems
The most recent USDA report on pig inventory in the US shows 110,000 head added in April-May but the number is a mystery to some of the observers. "We certainly believe that the USDA has played catch up in the breeding inventory. There is no way 110,000 were added in April-May. Probably missed sows in prior months. The increase of 3% in market hog inventory probably reflects the fact the breeding herd was probably higher than previously stated in earlier quarterly reports", explained Jim Long, President – CEO Genesus Inc, in a commentary.
Nevertheless, the growing of the pig inventory is putting pressure on the prices as the US industry is confronted with retaliatory measures adopted by different foreign partners and adverse market conditions.
"We expect all hogs will be handled but the billion-dollar question at what price? Wildcards on pricing are beyond just hog supply. Tariffs on U.S. pork by both China and Mexico will make market access cost more expensive for U.S. product. The tariffs no matter how we look at them are not doing anything but lowering the price of U.S. hogs and pork. Lots of pigs, tariffs, looks like tough slugging in the months ahead. The coming months will be challenging for profitability", commented Mr Long.
From that perspective, tariffs may impact the US pork performance in its largest volume market, Mexico, the neighbouring country accounting for about 800,000 tonnes and $1.51 billion value in 2017. At the same time, China and Hong Kong have received 495,637 metric tons (mt) of pork and pork variety meat, valued at $1.08 billion, being the second-largest international market by volume and third-largest by value.
Both Mexico and China has responded to the White House new taxes on imported aluminium and steel by imposing tariffs of 20% and 25%, respectively, to several US products, including pork.
(Photo source: Defense.gov)
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