(The opinions expressed here are those of the author, a market analyst for Reuters.)
By Karen Braun
FORT COLLINS, Colo., May 5 (Reuters) - Meatpackers and livestock producers in the United States have spent at least a year adjusting to the surge in business to China, which has faced a severe pork shortage in the wake of its battle against African swine fever.
But now, as the United States is on the brink of its own meat crisis due to the coronavirus pandemic, American pork supplies are being shipped off to China at a breakneck pace, creating the perfect recipe for additional U.S.-China tensions.
For some American consumers, the optics of this situation might be poor given how the virus originated in China late last year. But record U.S. meat exports to China have been the plan all along, to satisfy both China’s needs and to lift U.S. business.
China began slowly losing its hog herd, the world’s largest, in August 2018 as African swine fever (ASF) began to spread through the country. This has curbed the country’s pork production by at least a third, forcing China to rely on imports more than usual.
The timing of the Phase 1 trade deal was favorable for both sides as it pertained to the ASF situation because it allowed China to secure more U.S. pork and other meats while adhering to the terms of the deal. Beijing in February cleared more U.S. beef products for import after lifting a poultry ban late last year, and those sales have begun to increase, too.
Sales of U.S. pork and beef to China were especially elevated in April, but several U.S. slaughterhouses began to close last month due to outbreaks among employees of COVID-19, the respiratory disease caused by the new coronavirus. Animal slaughter has sharply declined, and fresh meat appears on its way to joining toilet paper on the "endangered" list at U.S. grocery stores.
The U.S. meat shortage and the Phase 1 goals of increasing exports to China seem to be opposing forces, raising the question of whether sales and shipments will or should be limited. Some restrictions would not be surprising given U.S. President Donald Trump’s more combative tone in his recent comments on trade with China.
Trump has touted the Phase 1 deal ever since it was signed in mid-January, but last week he said the trade deal is secondary to holding China accountable for its perceived mishandling of the virus outbreak.
Trump also last week ordered meat-processing plants to stay open to protect U.S. meat supply, but this has sparked some backlash from unions and lawmakers over the safety of workers, and it is not clear if the mandate will have the desired effect on production.
Disruptions have occurred at plants outside the United States as well, including in Brazil and Canada, the latter of which has seen the temporary closure of at least eight meat plants. The U.S. shortfalls will either be an opportunity for other suppliers, or importers like China may have to cut back if international meat production is reduced.
The United States exported 95,892 tonnes of pork and pork products to China in March, according to data published on Tuesday by the U.S. Census Bureau. That is the second-highest volume on record behind December 2019 at 102,177 tonnes. (tmsnrt.rs/2yme6Hp)
U.S. pork and pork product exports to China in the first three months of 2020 totaled 280,507 tonnes, nearly three times larger than 2014’s record for the period and up 300% over the first three months of 2019. That three-month total is nearly half of 2019’s full-year record volume to China, which was 574,988 tonnes.
U.S. pork exports to all destinations hit 291,456 tonnes in March, an all-time high for any month, and exports excluding China were the second-best for March behind 2018. Pork exports to China accounted for a third of all U.S. shipments in the first three months of 2020. (tmsnrt.rs/3doicxv) (tmsnrt.rs/2xAZwv1)
U.S. beef and poultry exports to China between January and March were only 1% and 5% of total exports, respectively, but the numbers were up on the year, including a 12% rise for beef.
Chicken paws, or feet, remain China’s largest U.S. poultry interest, but meat sales have risen following Beijing’s lifting of the import ban late last year. U.S. poultry and product exports to China in March were the largest for any month since August 2013.
Preliminary U.S. export data for April suggests that pork exports to China were comparable with March while beef shipments were likely higher. It is important to remember that most of the recent sales and exports to China were accumulated before the U.S. meat shortage truly escalated.
The value of all U.S. pork, beef, poultry and products exported to China in the first three months of 2020 totaled $781 million.
U.S. meat output is falling rapidly as animal slaughter has plunged, prompting warnings from the industry that grocery store meat cases could soon be empty.
In the week ended May 1, average daily slaughter estimates for U.S. hogs were down 21% from a week earlier and down 41% from four weeks earlier. Average daily cattle slaughter was down 9% and 33%, respectively, in those periods.
The closure of restaurants has already punctured demand in the United States, but the retail sector had not been prepared for such a steep loss in meat production.
Major U.S. meatpacker Tyson Foods Inc, for example, reported last week that homebound consumers have boosted retail demand for its meat by 30%-40%, but overall sales are expected to decline in the second half of the year due to lost restaurant and foodservice business.
Unlike corn and soybeans, meat products cannot be stockpiled for months or years, meaning the cushion is extremely thin when meat production falls short.
At the end of March, frozen stocks of U.S. beef totaled 502 million pounds, third-largest for the date behind 2013 and 2012. Frozen stocks of pork were 622 million pounds, the fourth-largest end-of-March supply on record.
That sounds like a lot, but it is not when compared with normal demand. Using average 2019 consumption figures, the end-of-March frozen beef stocks would cover just under a week of demand, while the pork supply could last for 1.5 weeks.
Editing by Matthew Lewis