Chinese buyers canceled a major order for American pork, the U.S. Department of Agriculture said Thursday, heightening fears that the U.S.-China trade dispute was set to inflict even more pain on American farmers who have taken a series of hits in Trump’s trade wars.
As of April 18 there were export commitments of American pork to China of 150,000 metric tons, only 50,000 of which had been shipped, leaving others in the balance.
The uncertainty is unsettling farmers like Randy Spronk who raises 250,000 pigs a year at his farm in Pipestone County, Minn., and sells to giant food processing companies like JBS, Tyson and Hormel.
The U.S. withdrawal from the Trans-Pacific Partnership Agreement in 2017 cost American farmers market share in Japan. Spronk says 20 percent tariffs in Mexico have cost hog farmers an additional $12 per animal and that an earlier round of Chinese retaliatory tariffs cost $8 per animal.
“American pork is a $6.4 billion export market, but we’ve been hit more than any other sector,” Spronk says. “Our highest value markets are the ones that are impacted by these tariffs. We got side swiped. The additive effects of these tariffs come out of my back pocket.”
Hog farmers saw a small financial uptick in March, attributed to the prospect of selling into China after that country’s pig industry was decimated by African swine fever.
That seems unlikely to happen now. The latest escalation of tariffs means that American pork will not be economically competitive in China.
Still, Joe Brusuelas, chief economist at RSM, thinks pork is an important negotiating tool with China.
“If the administration is serious about seeking a deal, that is clearly the path of least resistance,” he said. “Because of African swine fever and their own domestic situation, China doesn’t really have a choice and they will have to fulfill their needs by global supply.”
With the imminent release of the U.S. Department of Agriculture’s new trade relief program for farmers and ranchers, a battle has begun among agricultural sectors about who should get what, how much and in what form, and exactly who has suffered the worst losses due to trade disputes.
President Trump has promised at least $15 billion, a number he says corresponds to Chinese purchases of American agricultural products. This is on top of $12 billion distributed as relief to farmers last year to offset losses associated with Chinese retaliatory duties.
With that $12 billion, there were winners (soy) and losers (corn and wheat), specialty crops that were singled out for assistance (cherries and almonds) and other parts of the American food system that received no aid at all despite discernible losses due to tariffs (the seafood industry).
Spronk’s hogs have been part of the export market for years. Japan has historically been No. 1 by price and volume, buying high-value loins; Mexico is No. 2 by price, buying mostly hams. China has been the No. 3 export country, using up organs, feet and other lower-value cuts; Korea is in fourth place, prizing shoulder cuts, and Canada represents the fifth market by volume.
What Spronk wants to see is the removal of tariffs from Mexican and Canadian steel and aluminum (and thus retaliatory tariffs from Mexico), free trade agreements with Japan and China, and the ratification of the United States-Mexico-Canada Agreement.
“I don’t want the check from the government, I want to take pride in what I do. I want to compete,” he said.
Even within his own industry, there is dissent on what relief should look like.
Nick Giordano, vice president and counsel for the National Pork Producers Council, says the pork industry will ask the USDA to purchase pork for food aid. He says food banks and noncommercial channels represent a win for consumers and those in need without driving down pork prices with a glut on the market.
Senator Charles E. Grassley (R-Iowa) and others have indicated that purchasing farmers’ excess for international food relief would be subject to World Trade Organization violations.
“Unless the food is used for humanitarian reasons we’d be subject to WTO violation,” Grassley told The Washington Post early this week. “If (President Trump) buys up $15 billion and he can’t ship it overseas because he doesn’t want to violate the WTO . . . then it’s a depressant on the market because people know that the government holds so much grain.”
“Trump has opened the door to helping needy people outside the U.S.,” Giordano says, “And that’s the door we want to walk through. Most of our producers are going to say, ‘So what if there’s a WTO issue? We’ve got a five-alarm fire on our hands.' I defy anybody to look my producers in the eye and tell them the government shouldn’t work with them on pork as food aid.”
Although pork is just one of many sectors of American agriculture that have been injured by the trade wars, it is likely the hardest hit of the animal agriculture categories. The U.S. accounts for a relatively small share of beef and poultry sold into China because of other non-tariff barriers.
But there’s one American protein that has been welcomed with open arms in recent years in China: Maine lobster.
In the early 1990s there were 30 to 40 million pounds caught annually; by 2011 that number had grown to 100 million pounds. Producers like Tom Adams of Maine Coast, a lobster wholesaler, had to find new customers who weren’t going to drive down the domestic price.
“We started shipping to China in 2013 and it was our fastest growth area. Asia accounted for 40 percent of our sales in 2016 and 2017, and China accounted for half of that, $10 million a year in revenue from China.”
He had three weeks’ notice about the last round of retaliatory Chinese tariffs, which went into effect July 6, 2018. He had to make a fast pivot to find additional domestic sales, and he says the Canadian lobster industry has swooped in to sell to China.
“We were already at a trade disadvantage in the E.U. with Canada. In 2018 we had 35 percent of our market affected negatively by a trade agreement or trade war.”
Of the upcoming trade relief program, Adams isn’t hopeful.
“Grains play a much bigger role in our economy, but it bothers us as seafood industry members that we’ve never really been represented. We fall under agriculture but not in these relief programs. Our net income has been affected much like soy. These tariffs have affected by employees, my family and my industry.”