Market diversification critical to hog industry, too

July 8, 2021 | Bethany Baratta

The U.S. soybean industry understands the importance of diversifying its portfolio, sending soybeans to customers worldwide. So, too, must the U.S. hog industry, market experts told a crowd at the World Pork Expo in Des Moines recently.

That’s because China, a large purchaser of U.S. soybeans and pork, is expected to scale back its purchases of pork as it rebuilds from African swine fever (ASF).

“The world meat markets have been in upheaval really since ASF swept into China,” says Rupert Claxton, meat director for Gire International. “We’re tackling the dual effects now with not just ASF in Asia, but COVID as well and the impact that’s having on consumer demand.”

As China rebuilds their hog herd, there’s an influx of pork imported into the country. He expects that to taper off as China works toward self-sufficiency.

Claxton says Chinese producers are realizing modern production is more expensive than just feed. It’s currently not cost competitive, and he sees potential barriers mid-term.

Market diversification

Diversification away from the major destinations for U.S. pork (China/Hong Kong, Mexico, Japan and Korea) is important for long-term export prices, Claxton says.

Pushing the consumer price too high means demand will drop off, he says.

“U.S. alternative outlets need to be in place, both as a future lever, and as insurance,” Claxton says.

U.S. pork export volume was the third largest on record in May 2021, led by exports to China.  However, there was also substantial export growth to the Dominican Republic, the Philippines and Colombia.

“It’s not about replacing China, it’s about finding other markets to keep product moving,” Claxton said.

Joel Haggard, senior vice president of the Asia Pacific Region for the U.S. Meat Export Federation (USMEF), expects Chinese market volatility in the coming year.

The USMEF’s pork export report notes China’s softened demand from 2020 levels, and highlights opportunities in other regions.

China/Hong Kong is still the largest destination for U.S. pork in 2021, the USMEF export report notes. This is partly due to sustained demand for variety meat, for which exports through May were up 3% to 136,577 metric tons, with value up 9% to $332 million, the USMEF report notes. A slowdown in muscle cuts meant total exports were down 22% to 408,896 metric tons, valued at $952.7 million (down 24%).

“The continued decline in China’s pork and live hog prices suggests this trend is likely to accelerate in coming months, underscoring the importance of further export growth to other destinations,” the USMEF report notes.

Clay Eastwood, director of international marketing for the National Pork Board, said the Pork Checkoff is working with USMEF as the industry’s “feet in the street” to diversify markets for the U.S. hog industry.

“Diversification is really a key piece of our strategy … as we position pork for long-term success in the international space,” Eastwood said.

The checkoff developed an international marketing strategy to build confidence in U.S. pork in a diverse global protein market. The international marketing diversification strategy task force is made up of producers engaged in learning about what USMEF does, and how to build upon the export strategy process. They’re learning how USMEF takes pork and other investments and adds supplemental funding through the U.S. Department of Agriculture (USDA); turning a $7 million pork checkoff funds into a $14 to $15 million pork budget utilized on pork’s behalf.

“I’m encouraged by how we extend our dollars and how we leverage our resources globally,” says Nick Berry, a member of the international marketing diversification strategy task force and CEO of Swine Genetics International.

Using these funds, the Checkoff invests in assessment to determine how best to market pork in countries around the world.

Global firm Gira conducted market assessments to determine marketing opportunities in the Philippines, China and Vietnam. The assessments were funded by the Pork Checkoff and the USDA Foreign Agricultural Service Emerging Markets Program.

An additional product differentiation study, funded through the Pork Checkoff, will be released later this year. In that study, the National Pork Board identified six key markets to determine the messages that best resonate with customers.

“You as producers have an excellent story to share with our customers in international markets,” Eastwood says. “But we’ve identified six key markets: Japan, Korea, Mexico, Canada, China, and Hong Kong where we would like to figure out what messages resonate best with those customers in the market.”

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