There’s no denying that the United States’ bovine spongiform encephalopathy case will impact beef exports—more than 30 countries have closed their ports to such shipments. The question remains, what will it do to U.S. pork sales?
Some believe that U.S. pork exports will improve as a replacement for U.S. beef. But determining the degree to which this might occur is difficult since there’s no historical precedent to consider.
Japan, Mexico and South Korea were the major U.S. beef buyers in 2002, notes Chris Hurt, Purdue University agricultural economist. That accounted for a remarkable two billion pounds of the 2.4 billion pounds of beef exports. How much of this will come back to the United States in the form of additional pork exports is unclear.
"No one knows the answer, but the Japanese have an import safeguard which triggers when pork import volumes reach a 19 percent increase compared to the average of the last three years," says Hurt. "That may limit the increase in their pork imports to about 20 percent.”
South Korea has a fairly low-cost domestic pork production industry, so it’s not likely to purchase much additional U.S. pork. Mexico will likely buy more U.S. pork, but is not as large a pork importer as Japan.
“Assuming that beef imports are restricted for six months, the positive pork-demand impact might equate to 1 percent of U.S. pork production,” notes Hurt. However, there is much uncertainty. The United States exports about 10 percent of its annual beef production. But last year and this year’s U.S. beef production remains at such a low supply that the domestic market can absorb supplies that otherwise would have been exported without destroying the market.
Hurt points out that Canada may be able to re-instate its beef exports sometime this year, which is significant to the United States’ situation. After Canada's May 20, 2003, BSE announcement, the country sent extra market hogs to the Unites States, representing an additional supply of about 1.5 percent of U.S. slaughter. That action pushed U.S. live-hog prices down by $2 per hundredweight.
"If Canadian beef exports resume sometime in 2004, beef prices will rise in Canada and fewer market hogs will be sent to the United States," says Hurt. "The much stronger Canadian dollar will also help trim incentives for Canadians to send market hogs to the United States in 2004."
There’s also a school of thought that U.S. beef exports could be salvaged earlier than expected because the single-infected dairy cow’s origin was traced to Canada. That fact, and other USDA strategies and assurances to prevent BSE from occurring in the United States, could make foreign markets more receptive to opening their ports. Purdue University