Trade war puts the hoof into US pig part exports to China

19-Jul-2018 Intellasia | Reuters | 6:32 AM Print This Post

Before the US-China trade war, American pig processors exported nine out of every 10 pigs’ feet and heads they shipped overseas to China and Hong Kongfor prices higher than they would fetch anywhere else.

Those parts and others that most Americans won’t eathearts, tongues, stomachs, entrailshave a special place in Chinese culinary culture and, consequently, in the profit margins of US pork exporters.

“You often hear that the products are what keep the plants running,” said Erin Borror, economist for US Meat Export Federation, a trade group.

The pipeline for these profitable pig parts, known collectively as offal, is closing fast after China slapped two tariffs on US pork totalling 50 percent.

That’s forcing US processors to sell an increasing amount of such parts for pennies to be rendered into food for pets and livestock.

US shipments of byproducts affected by the duties fell by about a third in April and May combined, after China imposed the first 25 percent tariff on American pork in April, according to the latest data from the US Department of Agriculture.

On July 6, Beijing implemented an additional 25 percent duty as the world’s two largest economies slapped tariffs on $34 billion worth of each others’ goods.

US President Donald Trump has said the US tariffswhich have provoked equivalent Chinese retaliationaim to close the $335 billion annual US trade deficit with China.

The USDA declined to comment on the drop in offal exports.

Exporting pig offal to China has been a money-maker because consumers there enjoy its strong flavor. Stewed pigs’ feet with white beans, for instance, is a famous dish from Sichuan province, one of the country’s culinary capitals.

At least one product exported to China has almost zero value anywhere else: hind pigs’ feet. Rear feet are nearly impossible to sell elsewhere because they have holes in them from where hogs are hung upside down in packing houses, which turns off consumers in other countries, said Dermot Hayes, an agricultural economist at Iowa State University.

“They go from zero value outside of China to a significant value when the Chinese market is fully open,” Hayes said.


China will likely have little trouble finding supplies to replace US pig offal, analysts said.

An expansion of its domestic hog industry had already made buyers less dependent on American pork before the trade tensions.

Chinese buyers could also import more from Europe, where hog prices have been trading at their lowest levels in at least two years, analysts said.

“The Chinese aren’t going to get hurt by this,” said Ken Maschhoff, chair of The Maschhoffs, the largest family-owned US pork producer. “Chile or Europe or somebody else is going to say, ‘Well, we’ve got a bunch of stomachs or livers or feet that we’re not using…’”

The slowdown hurts major processors in the United States, such as WH Group Ltd’s (0288.HK) Smithfield Foods Inc; Seaboard Foods, a division of Seaboard Corp (SEB.A); and the JBS USA unit of Brazil’s JBS SA (JBSS3.SA). Such companies benefited from record total US offal sales of more than $1.1 billion in 2017.

Smithfield, the biggest US pork processor and exporter to China, declined to comment. The company, owned by China-based WH Group, sells offal, jowls and lard, according to its website.

Meat processor Tyson Foods Inc (TSN.N) also declined to comment. Seaboard and JBS did not respond to requests for comment.

Margins for US pork processors are under pressure due to the impact of the trade fight and last month slipped to their lowest level in three years.

WH Group’s stock price has tumbled 28 percent so far this year. Tyson shares are down 19 percent and Seaboard shares have dropped 13 percent.


Category: China

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