Trade war costs US pig sector billions

The Chinese import tax pork (25%) is part of a package of countermeasures to tariffs that the US imposed on aluminum and steel from China in early April. Although there is currently a 'ceasefire', it remains to be seen whether there will definitely be white smoke. Wilbur Ross, the US Secretary of Commerce, will visit China this week to resolve the dispute. However, the race is not over yet.

Pig prices down
Meanwhile, the American pork sector is very disappointed with the trade war. According to Dermot Hays, an economist at Iowa State University, losses for the US industry could amount to more than $2 billion per year. This is because hog futures have fallen by around $18 per hog since rumors of a possible trade war emerged. According to Hayes, this decline is not just a result of the trade war, although that is the main cause.

Pig prices also took a hit in the physical market; the noted Iowa/Minnesota odds a paltry dollar per kilo at the beginning of April. However, since then prices have been on the rise again (to $1,44 per kilo on May 28). The revival fits in with the seasonal pattern on the American pig market. However, at this time of year, this price level is the lowest since 2009.

(Text continues below the chart)The listing took a significant hit due to the trade war.

At a bad time
De trade war comes at a very bad time for the American pig sector. This is because the pig herd is able to record record figures from quarter to quarter. Various slaughterhouses have expanded considerably. The US pork sector is dependent on exports; it accounts for approximately 25% of the American pork price. China is the second largest sales market for American pork (after Mexico) (495.637 tons in 2017).

It is hoped that China and the US will reach an agreement in the short term for the American pig sector. If not, 2018 could well be a year with very disappointing pork prices in the US.