Jim Long Pork Commentary: The big story - China agrees to resume buying Canadian pork

Last week much to the relief of Canadian and should be to US pork producers China agreed to begin again to import Canada Pork.

13 November 2019, at 10:00am

Last June China stopped purchasing Canadian Pork. Up to that time in 2019, China’s pork imports from Canada were 15 percent of total imports, just below Spain and Germany at about 18-20 percent each.

The closure put pressure on Canada-US pork prices. The issue that triggered the stoppage was false labeling by a Canadian pork exporter to China that was missed by the Canadian Food Inspection Agency. There was also some political issues involved mainly due to the Huawei Executive being held by Canada for possible extradition to the US.

Last week much to the relief of Canadian and should be to US pork producers China agreed to begin again to import Canada Pork.

Our observations:

  • Pork leaving Canada to China takes that pork out of Canada, US and Mexico markets.
  • Less supply in domestic North American market will support prices in all three countries.
  • Canada’s tariff on pork to China is 12 percent. Currently US is 70 percent
  • There are reports that over the next twelve months China's pork production will be reduced by 24 million tons. USA. - Canada - Mexico’s production in total isn’t much more than 15 million tons a year.
  • The amount of pork Canada can send to China is much more limited by logistics than demand.
  • China is a black hole for pork. It will go and disappear.
  • The arithmetic to send pork to China is aided by the raw economics.

We have done business in China for eight years. Chinese are natural capitalists and traders. The arithmetic of buying pork in North America is simple - pork cut outs 80₵ lb. last week. China pork cuts outs about $3.10 lb.

Example: buy pork in Canada at 80₵ lb., pay 12 percent tariff. Sell Pork at $3.10 lb. That’s a spread of over $2.00 a lb. to cover costs.

A 200 lb. carcass = $400. It doesn’t take an Ag Economist to figure out the incentive.

What we calculated is probably over simplified but make it half of what we calculate, it sure the heck beats raising hogs the last couple years.

One of our points of this exercise is that beyond needed pork to fill the black hole created by ASF there is tremendous financial incentive for pork to move to China. We are not sure how fast Canada can get back to full speed shipping to China, but obviously big incentive to get it going.

Other observations:

  • Market Hogs are $700-$750 US each in China. It is really expensive for some potential producers who have empty facilities or were backyard producers to purchase gilts.
  • Risk-Reward:
    • First, do they have money to place gilts and carry the cost to get to production?
    • Second, ASF has not been stopped. Invest and get ASF?
    • Real issues for China to rebuild industry.

Last week we highlighted Meta Farms data that indicates average herd had 12.2 percent sow mortality. The top 10 percent 18.1 percent. This past week we read a feature article on National Hog Farmer blog about Pedicures - feet trimming for sows. Wonder why there are more dead sows? It’s poor feet and legs genetically.

If you wish to lower sow mortality, maybe ask the Genetic supplier if their genetics need feet trimming- It's cause and effect.

We will categorically state that Genesus doesn’t.

We have been told that one genetic company actually encourages their customers to go to foot trimming school. That’s a fun job. Foot trim and haul out dead sows.

As Forrest Gump said “Stupid is as Stupid does!