Spend Matters welcomes this guest article by Thomas Reilly of Mintec.
In 2015 each American will eat an estimated 49.7 pounds of pork products. With US pork prices 28% lower than they were a year ago, that’s good news for a lot of people. The price of pork has fallen due to the strong US dollar against the euro and a competitive export market. The USD has increased nearly 17% against the euro since August 2014.
The dollar affects the price of pork within the US market simply because the US is the largest global exporter of pork. In order to remain competitive on the international market, when the dollar strengthens, the price of pork falls. Consequently, the recent strong dollar has resulted in low pork prices.
The euro and the EU market as a whole is extremely important as it is the US pork industry’s main competitor. The US accounts for 33% of the world’s total pork exports, but the EU comes a close second with 30% of the world’s total pork exports.
In the first half of 2015, US pork exports were down 5% year-over-year in volume, at 1.1 million tonnes. More interesting though is how much the value of those exports fell. In the first half of 2015, the value of pork exports totalled $2.88 billion; but in the same period in 2014, pork export value was $3.34 billion. That’s a much bigger 16% year-over-year fall.
The top export markets for the US are Mexico, Japan, China, Canada and South Korea. For the first 6 months of 2015, exports to Japan, Canada and China all fell, with Japan down 7% year-over-year, Canada down 4% year-over-year, but China down by a massive 51% year-over-year. The domestic price of pork in China has been rising, and therefore its imports have risen. However, the increased imports have come from the EU not the US, due to the cheaper currency.
It’s not all bad though. Exports to Mexico, which receives a third of all US pork exports, increased 10% year-over-year between January and June 2015. Mexico has become a more important market for US pork producers since losing exports to Russia in 2014 to a Russian import ban. Additionally, it is cheaper to transport to Mexico from the US than it is to export farther afield to Asia.