Farmscape for June 11, 2018
The Pioneer Chair in Agribusiness with Iowa State University calculates the imposition of retaliatory tariffs on U.S. pork will shift the profitability of U.S. pork producers from break even to losing money.
Trade was among the top of mind issues discussed last week as pork sector stakeholders from around the world gathered in Des Moines for World Pork Expo 2018.
Dr. Dermot Hayes, a Professor and Pioneer Chair in Agribusiness with Iowa State University, says the reaction to U.S. tariffs imposed on imported aluminum and steel was swift and for the pork industry costly.
Clip-Dr. Dermot Hayes-Iowa State University:
China placed a 25 percent duty on U.S. pork April 1 and in the week before and afterwards U.S. live hog prices stretching out a full year were down significantly.
That's in part because some of the products we export to China don't really have another alternative market.
Mexico imposed a 10 percent duty on U.S. hams and shoulders and that will go to 20 percent in early July.
The average producer in Iowa was expecting a break even year where they just covered their total costs with no extra profit.
Now it looks like they'll average about nine dollars lost per head over the course of a year.
The drop in the futures and the nearby contracts was greater than that but the reduction in the futures out further there was less.
That was all the China impact.
There has not really been a Mexico impact.
That's in part because Mexican ham buyers, realizing that the duty is going to go from 10 to 20, are buying hams right now rather than pay a 20 percent duty and also because there's all sorts of leaks out of the administration that none of this is permanent.
Dr. Hayes notes other nations are also upset with the United States over the aluminum and steels issue and there is concern that Japan might impose retaliatory duties on pork as well.
He points out the U.S. ships a lot of pork to Canada but Canada ships even more to the United States and he suspects, if Canada imposes duties on the U.S., it will not touch pork because Canada has a positive trade balance in pork.
For Farmscape.Ca, I'm Bruce Cochrane.
*Farmscape is a presentation of Sask Pork and Manitoba Pork