Pork Export Outlook - Dr. Dermot Hayes, Iowa State University, from the 2020 Minnesota Pork Congress, held January 28 - 29, 2020, Minneapolis, MN, USA. More presentations at https://www.youtube.com/playlist?list=PL_5bHW6MgRAxDHcrbY42-xvfSZdMGNdQD

1. Pork Export Outlook
Dermot Hayes, Iowa State University
Presented at the Minnesota Pork Congress, Jan 29th 2020

2. Overview
• Basic data on the industry, trade, transportation costs and
competiveness
• The phase one trade deal
• CSF impact
• Packing plant capacity and freezer concerns
• Japan early harvest deal
• Feed costs
• A possible change in attitude in China

3. Thinking at the margin
• In 1998, US pork packers reached capacity
• The value of the surplus hogs was close to zero
• In a commodity market, all of the product sold on a day will be sold at
the same price
• This meant that all cash market hogs sold for close to zero, this was
true even for those the plants slaughtered
• Bottom line, the last (marginal) customer sets the price and this
customer is typically an international customer

4. -
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Minnesota Hog Inventory (Dec 1)

5. -
5,000
10,000
15,000
20,000
25,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Minnesota Hog Marketings

6. -1500
-1000
-500
0
500
1000
1500
2000
2500
3000
35001980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
US net exports of beef and pork

7. -2000
-1500
-1000
-500
0
500
1000
1500
2000
2500
3000
3500
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US net exports of beef and pork
Meat, Beef and Veal Meat, Swine

8. 0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Imports as a Share of Consumption
Australia Colombia Honduras Japan Korea, South Mexico New Zealand

9. Production cost per pound of carcass

10. -0.40
-0.20
0.00
0.20
0.40
0.60
0.80
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Net profit (Euro/kg hot weight)
France USA Spain Denmark Germany

11. Commodity: Pork & Pork Products
Month of November 2019
Metric Tons Product Weight
World 253459
China 74942
Mexico 56234
Japan 32578
Canada 20483
Korea South 18119
Colombia 10258
Australia 9544
Hong Kong 7289
Honduras 3550
Chile 2502
Philippines 2483
Vietnam 2455
Dominican Republic 2156
Guatemala 1862
Panama 1633
Nicaragua 1089
El Salvador 840
Costa Rica 651
Taiwan 643
Bahamas 475
New Zealand 402

12. Phase one trade deal
• The deal keeps retaliatory duties in place
• Yet requires that sales be based on market forces
• These two requirements contradict each other and have created
skepticism
• The penalties for failure to reach a deal do not kick in until after the
election, another source of skepticism
• Smithfield and COFCO do not pay the duties and China desperately
needs US pork, so there is room for optimism about pork exports
• There is a rumor that the duty on soybeans will be removed soon this
would be very positive for soybeans

13. The deal in perspective
Source: USDA-FAS

16. ASF-Asia

17. 20
22
24
26
28
30
32
2018/07 2018/08 2018/09 2018/10 2018/11 2018/12 2019/01 2019/2 2019/03 2019/04 2019/05 2019/06 2019/07
Official Chinese Sow Inventory from July 2018 to July 2019 (Million
Sows)

18. $0.00
$0.50
$1.00
$1.50
$2.00
$2.50
1/2014 1/2015 1/2016 1/2017 1/2018 1/2019 1/2020
U.S.$/pound
Live Hog Prices
Weekly since Jan 2014
U.S. (Live) China (Live) Germany (Live) Spain (Live)

19. Data Source: USDA Foreign Agricultural Service
China > 90%

20. 2019 vs… +22% +12% +8% 2019 vs… +12% +10% +9%
Data Source: USDA, Compiled by USMEF

21. Source: USDA Long-term projections

22. 2014 = +$56.07 [+$9.98 to +$93.99]
2015 = +$11.33 [-$9.68 to +$28.79]
2016 = +$7.13 [-$21.15 to +$33.80]
2017 = +$18.94 [+$3.40 to +$43.47]
2018 = +$6.48 [-$17.65 to +$29.09]
2019 = +$12.40 [-$11.44 to +$41.76]
2020f = +$23.90 [+$2.06 to +$47.34]

23. USDA Quarterly Hogs and Pigs Report – United States
December 23, 2019
2019 as % Pre-Report Pre-Report Actual -
2018 2019 of 2018 Range Estimate Estimate
Inventories on Dec 1 *
All hogs and pigs 75,070 77,338 103.0 102.0 - 103.5 102.9 0.1
Kept for breeding 6,326 6,461 102.1 100.5 - 102.8 101.6 0.5
Market 68,745 70,877 103.1 102.1 - 103.6 103.0 0.1
Under 50 pounds 21,858 22,128 101.2 101.4 - 103.7 102.7 -1.5
50-119 pounds 19,369 19,696 101.7 101.2 - 103.6 102.4 -0.7
120-179 pounds 14,323 14,976 104.6 102.2 - 104.4 103.0 1.6
180 pounds and over 13,195 14,076 106.7 102.8 - 105.5 104.6 2.1
Farrowing **
Jun – Aug sows farrowed 3,172 3,180 100.3
Sep – Nov sows farrowed 3,205 3,166 98.8 99.4 - 101.6 100.0 -1.2
Dec – Feb intentions 3,099 3,129 101.0 99.9 - 101.2 100.4 0.6
Mar – May intentions 3,133 3,147 100.4 100.3 - 102.8 101.1 -0.7
Sep – Nov pigs per litter 10.76 11.09 103.1 101.1 - 104.1 102.9 0.2
Sep – Nov pig crop * 34,496 35,101 101.8 101.6 - 104.2 102.9 -1.1
* 1,000 head, ** 1,000 litters Data Source: USDA-NASS estimates. Urner Barry pre-report estimates.

24. +2.4% (‘16 vs ‘15)
+3.0% (’17 vs ’16)
+2.3% (’18 vs ’17)
+4.4% (’19 vs ’18)
Data Source: USDA National Agricultural Statistics Service

25. 0
500
1000
1500
2000
2500
3000
3500
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
US Pork Exports to Japan (Million Dollars)
US Exports with FTA No Marukin US Exports No Japan FTA US Exports FTA w Marukin

26. Partner Country
Quantity % Change
2019/20182017 2018 2019
World 2309639 2310500 2469811 6.90
Mexico 777055 765264 688571 - 10.02
China 288066 203434 474739 133.36
Japan 364923 370356 345214 - 6.79
Canada 191397 187155 198272 5.94
Korea South 157903 221237 195552 - 11.61
Hong Kong 180621 136771 95565 - 30.13
Australia 62869 70246 95421 35.84
Colombia 64057 85317 92723 8.68
Chile 27626 28616 40631 41.99
Philippines 38785 47983 40094 - 16.44
Dominican Republic 28826 39513 31957 - 19.12
Honduras 25809 28234 30535 8.15
Guatemala 15507 16659 19293 15.82
Taiwan 13674 18427 16767 - 9.01
Panama 9310 11613 14600 25.73
Vietnam 2813 15085 13426 - 11.00
New Zealand 6470 6960 9985 43.46
El Salvador 5114 6844 7345 7.33
Peru 5333 6096 7344 20.47
Nicaragua 4761 6005 7239 20.56
Costa Rica 3957 4887 7091 45.10
Bahamas 4862 4530 4515 - 0.32
Singapore 4823 3311 4431 33.82

27. 0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
US Soybean Exports

28. 0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
US Corn Exports

29. U.S. Corn Supply and Use
2016 2017 2018 2019 2020
Area Planted (mil. acres) 94.0 90.2 89.1 89.9 94.5
Yield (bu./acre) 174.6 176.6 176.4 167.0 178.5
Production (mil. bu.) 15,148 14,609 14,420 13,661 15,545
Beg. Stocks (mil. bu.) 1,737 2,293 2,140 2,114 1,910
Imports (mil. bu.) 57 36 28 50 25
Total Supply (mil. bu.) 16,942 16,939 16,588 15,825 17,480
Feed & Residual (mil. bu.) 5,470 5,304 5,618 5,275 5,775
Ethanol (mil. bu.) 5,432 5,605 5,376 5,375 5,450
Food, Seed, & Other (mil. bu.) 1,453 1,451 1,425 1,415 1,420
Exports (mil. bu.) 2,294 2,438 2,065 1,850 2,100
Total Use (mil. bu.) 14,649 14,799 14,474 13,915 14,745
Ending Stocks (mil. bu.) 2,293 2,140 2,114 1,910 2,735
Season-Average Price ($/bu.) 3.36 3.36 3.61 3.85 3.40
Source: USDA

31. China-US Comparison

36. Bottom Line
• Prospects for pork production in the upper Midwest continue to be good,
in large part because of export prospects
• The trade war was a scare and appears to be behind us
• ASF in China will either lead to massive direct exports or backfilling
• Either way it is a five year opportunity
• ASF in the US would be a deal breaker
• Feed costs should be moderate, now is a good time to lock in
• A real concern about packing plant capacity this fall, use puts or forward
contracts
• Long term prospects are great, especially because China is signaling that it
wants to rely on significant imports, much as is true in the rest of Asia