U.S. Exports & International Trade - Becca Nepple, National Pork Board, and Dr. Dermot Hayes, Iowa State University, from the 2016 World Pork Expo, June 8 - 10, 2016, Des Moines, IA, USA. More presentations at http://www.swinecast.com/2016-world-pork-expo

1. U.S. Exports and International Trade
Becca Nepple, VP International Marketing – National Pork Board
Dr. Dermot Hayes, Professor of Economics – Iowa State University

2. Strategic Plan Export Goal
By 2020, increase pork exports through access to new
markets and expansion of existing markets, and
achieve 9% average annual increase in value and
quantity, compared to 2014 year-end data.
By 2020, increase pork exports through access to new
markets and expansion of existing markets, and
achieve 9% average annual increase in value and
quantity, compared to 2014 year-end data.

3. Areas of Investment
• Marketing and promotion
• Market research
• Market intelligence
• New product development
• Marketing and promotion
• Market research
• Market intelligence
• New product development

4. Exported Cuts

5. Exported Cuts

6. 2015 Progress
• Year-end exports:
– Value ↓16% from 2014
– Volume ↓2%
– 24% of production
– $48.31/head value
• Momentum in 2016
• MCOOL resolution
• Plants for China export relisted
• TPP negotiation results positive

7. Challenges
• West coast port slowdown =
Need to rebuild trust
• Currency
• Russian closure
• Steep competition
• Tariff and SPS barriers
Share of
Global
Exports

8. Opportunity
• Market access and development
• Relationship-building
• Education and training
• Creative promotion

9. The International Market for US
Pork
Dermot Hayes
Iowa State University

10. Overview
• Long run prospects for exports
• Why the US domestic market is so sensitive to exports
• Short run prospects for exports
• China

12. Trade agreements
• Preferential trade agreements have gone viral
• If a country does not keep up, other countries will use preferential
access to take market share
• President Obama agreed to the FTA with South Korea because he did
not want to be disadvantaged relative to the EU in that market
• Japan is negotiating trade agreements with the EU and Canada and
has one with Mexico and Australia

19. TPP
• Japan agreed to:
• eliminate barriers to processed pork after 5 years
• reduce the ad valorem duty from 4.3% to 2.2% and to eliminate this duty
over 10 years
• Impose a maximum duty of 50yen/kg $0.19/lb after 10 years
• fix the gate price at 524 yen/kg permanently, this is a major concession
because inflation will gradually increase the delivered
• Vietnam and Malaysia agreed to duty free access after 10 years

20. Why is the US Pork Market so Sensitive
to Exports?
• US consumers behave in a well understood and predictable fashion
• US pork production can be predicted well in advance
• US cash and futures traders understand these forces and bid them into
prices
• Exports can change rapidly due to changes in policy, disease issues and
because the US is a residual supplier when other countries have scarcity
• For every $1 million in exports the value of each carcass increases by 7
cents for the six weeks surrounding the export increase, this means that
the US producer gets a benefit of $880,000 per one million dollar increase
in exports
• The impact of variety meat exports is 2-3 that of muscle meat

22. United States (Consumption/Domestic) Export Statistics
Commodity: Total Pork, U.S. Total Pork Exports 0504 Pk Specific
Year To Date: January - April
Partner Country
Quantity % Change
2014 2015 2016 2016/2015
World 776913 726104 722641 - 0.48
Mexico 221312 237997 213358 - 10.35
Japan 169060 149849 127807 - 14.71
China 116778 52719 114483 117.16
Canada 65100 63539 63195 - 0.54
Hong Kong 23915 46465 62036 33.51
Korea South 57423 79402 51250 - 35.45
Australia 24223 18585 19912 7.14
Colombia 18541 15651 11027 - 29.55
Philippines 14655 10251 9803 - 4.37
Dominican Republic 6357 8397 8776 4.52
Honduras 5837 6563 8114 23.64
Guatemala 3846 4597 5415 17.80

23. United States (Consumption/Domestic) Export Statistics
Commodity: Total Pork, U.S. Total Pork Exports 0504 Pk Specific
Month Of: April
Partner Country
Quantity % Change
2014 2015 2016 2016/2015
World 192939 200120 188321 - 5.90
Mexico 53430 58490 53412 - 8.68
China 22214 18069 34976 93.57
Japan 48526 45927 32826 - 28.53
Hong Kong 5037 13362 17312 29.56
Canada 17382 14634 15685 7.18
Korea South 17122 22025 12097 - 45.08
Australia 4911 6721 4948 - 26.38
Colombia 4398 3562 2758 - 22.56
Dominican Republic 1867 2617 2336 - 10.75
Honduras 1795 1911 2050 7.26
Philippines 3851 2992 1796 - 39.98
Guatemala 1117 1180 1263 7.02

24. H-N-03
03/25/16
Data Source: Lee Schulz USDA-NASS
Livestock Marketing Information Center

25. H-N-02
03/25/16
Data Source: Lee Schulz USDA-NASS
Livestock Marketing Information Center

26. Year Comm’l % Chg. Avg Carcass % Chg. Comm’l Pork % Chg.
Quarter Slaughter Year Ago Weight Year Ago Production Year Ago
2014 (1,000 hd) (lbs) (mil. Lbs)
I 27,131 -2.6 213 2.7 5,784 0.2
II 25,575 -4.4 215 4.4 5,504 -0.2
III 25,558 -7.6 212 4.3 5,424 -3.5
IV 28,612 -4.0 215 1.7 6,131 -2.3
Year 106,876 -4.6 214 3.3 22,843 -1.5
2015
I 28,724 5.9 215 0.8 6,162 6.5
II 27,850 8.9 213 -1.1 5,925 7.6
III 28,477 11.4 210 -1.3 5,958 9.8
IV 30,375 6.2 213 -0.9 6,457 5.3
Year 115,425 8.0 213 -0.6 24,501 7.3
2016
I 29,259 1.9 213 -0.9 6,230 1.1
II 27,913 0.2 213 -0.0 5,943 0.3
III 28,711 0.8 210 -0.1 6,016 1.0
IV 30,194 -0.6 214 0.4 6,448 -0.1
Year 116,077 0.6 212 -0.2 24,637 0.6
2017
I 29,332 0.2 214 0.3 6,268 0.6
II 28,332 1.5 213 0.1 6,037 1.6
III 28,728 0.1 210 0.1 6,027 0.2
IV 30,774 1.9 214 0.0 6,575 2.0
Year 117,166 0.9 213 0.1 24,907 1.1
LMIC Pork Production and Price Quarterly Forecasts (6/6/16)
Sources: Lee Schulz USDA/NASS; USDA/AMS Livestock Market News; Projections and Forecasts by LMIC

27. 2013 = +$6.21 [-$25.60 to +$24.57]
2014 = +$61.85 [+$13.15 to +$107.25]
2015 = +$7.93 [-$18.40 to +$26.25]
2016f
= +$12.76 [-$12.83 to +$43.77]

28. New Pork Packing
Plants
Daily Slaughter
Capacity
Pleasant Hope, MO 3,000
Windom, MN 5,000
Sioux City, IA 10,000
Coldwater, MI 10,000
Proposed (In Iowa) 10,000
Total 38,000
Source: Various media reports. Lee Schulz
Calculations
Additions to Current
Slaughter Capacity
+ 38,000 per day
+ 205,200 per week
+ 10.7 million per year
= 450,000–500,000 sows
Current Slaughter
Capacity Utilization
Avg 2009-13: 87%
2014: 83%
2015: 89%
2016 YTD: 90%
76% - 83%
(at current productivity and import levels)
To get back to current slaughter
capacity utilization

29. China
• In Fall of 2015, the US had a surplus of pork and had to discount it
heavily to move it into international and domestic market
• China needed the pork but most US plants did not have access
• Europe took advantage of this opportunity
• About 60-70% of hogs now come from plants that have access to
China, this does not mean they are exporting yet
• The incentives are in place to move the hams and shoulder meat to
China

31. 06/06/16Data Source: USDA-AMS
Livestock Marketing Information Center
2016 YTD:
-$0.32/cwt (-8.5%) vs 2015
-$1.82/cwt (-34.8%) vs Avg 2010-14

32. Commodity: Pork & Pork Products (China),
Year Ending: April
Partner Country Unit
Quantity % Share % Change
2014 2015 2016 2014 2015 2016 2016/2015
World T 1473856 1477036 1953024 100.00 100.00 100.00 32.23
Germany T 210494 290729 435602 14.28 19.68 22.30 49.83
United States T 396764 366140 322179 26.92 24.79 16.50 - 12.01
Spain T 155502 189153 275471 10.55 12.81 14.10 45.63
Denmark T 230134 228562 273051 15.61 15.47 13.98 19.46
Canada T 156500 104334 162119 10.62 7.06 8.30 55.38
Netherlands T 27533 70029 137378 1.87 4.74 7.03 96.17
France T 91151 68623 109256 6.18 4.65 5.59 59.21
United Kingdom T 38691 45513 61414 2.63 3.08 3.14 34.94
Chile T 44651 47270 57730 3.03 3.20 2.96 22.13
Ireland T 31865 38403 52999 2.16 2.60 2.71 38.01
Hungary T 0 14913 30904 0.00 1.01 1.58 107.23
Belgium T 7984 11829 21397 0.54 0.80 1.10 80.89

33. How long will the China opportunity last?
• China killed 5-12 million low productivity sows in the last three years
• This was due in part to a disastrous corn price support policy
• Other factors included a dramatic reduction in backyard production
• The flood of sow meat disguised the problem for a while
• Now that they are rebuilding, the use of gilts for breeding will make
the scarcity even worse
• If rebuilding occurs at a normal pace then the opportunity will be
over in two years

34. Pigs in the River Problem
• Nationwide campaign to close pig farms in populated areas, this
includes Beijing, Tianjin, Hebei, Yangzi River Delta, Pearl River Delta
• Zhejiang province has closed 69,579 pig farms that had produced 4.9
pigs annually
• Ban on livestock production near markets and highways to cut down
on disease pressure
• New regulations on waste emissions for “scale” size farms, slurry
must be treated and applied to fields

38. Predicted new urbanization

39. Bottom Line
• The long run opportunities for US pork are enormous, especially if we
continue to implement trade agreements
• The US will have ample supplies of pork this fall and should find a ready
market in China, this should last for two years
• The Chinese pork industry has damaged its reputation among consumers
and policymakers, this could be a huge opportunity for US pork exports
• Over-reliance on China brings enormous risks (South China Sea, Steel,
Chicken, DDGS, Self Sufficiency, Trump)
• Chinese and US traders may need to find an alternative to cash market
purchases