Free Trade Helps US Producers and Chinese Consumers

CHINA - Free trade and modern transport will mean that Chinese consumers do not have to change diet while they are rebuilding their pork production.

30 June 2008

4 minute read

Asia

The country is already importing more breeding animals to help restock the herd that over recent weeks and months has been hit by disease, bad weather and an earthquake.

But while this is taking place the Chinese market will be able to ensure supplies through imports - many of which will come from the USA.

According to analyst Ross Korves on the website Truth About Trade and Technology, the US hog produces might also not suffer the losses they feared as they adjust they hog supplies to market demands.

"That is a win-win for economic efficiency," says Korves.

He said that until about a year ago the US pork producers and the Chinese consumers operated in different economic worlds and in 2006 China was a minor export market.

But he added: "Large pork supplies in the U.S. and pork production problems in China have created an opportunity for U.S. producers to avoid extremely low market prices and Chinese consumers to maintain their established eating patterns."

Korves added: "In January of this year USDA's World Agricultural Outlook Board (WAOB) projected U.S. pork production for 2008 at 22.8 billion pounds, up 4.1 percent from the 2007 estimate of 21.9 billion pounds and up 8.1 percent from 21.1 billion pounds in 2006.

"Market prices for live hogs were projected to average $41-44 per hundred pounds in 2008 after averaging $47 per hundred pounds in 2006 and 2007. With higher feed costs, the lower market prices were expected to result in substantial losses for hog producers.

"The June estimates from the WAOB show production for the year at 23.4 billion pounds, exceeding the January projection for 2008 by 2.6 percent and 2007 production by 6.8 percent.

"Hog prices averaged $39.64 per hundred pounds for the first quarter, near the low end of the $39-41 range expected by the WAOB in January.

"Prices for the second quarter are now projected to average $51-52 per hundred pounds, compared to the $43-47 per hundred pounds range projected in January. For the year hog prices are expected to average near the $47 per hundred pounds average for 2006 and 2007.

Many factors influence market prices for agricultural products, but the most observable change in the supply and use balance for U.S. pork is exports that through the first four months of 2008 are 52 percent higher than the first four months of 2007. China/Hong Kong imports are up over 311 percent to 319.2 million pounds and almost tied with the usual number one market Japan at 319.5 million pounds.

"The 311 percent increase in exports to China/Hong Kong is on top of a doubling of exports in calendar year 2007. The U.S. accounted for about half of China's total pork imports."