Pork continues to set records and the United States now exports 15 percent of its annual production.
But with those benefits come risks. China has decided to remove 15 U.S. meat plants from it's importer roster. At issue, say officials, is ractopamine residues. Now, China does have a zero-tolerance policy on ractopamine, but many will argue there's more to that story. Namely, non-tariff trade barriers in retaliation of the United States-- and global-- dissatisfaction with China's food, drug and other product's quality and safety standards.
It's worth noting that the U.S. Food and Drug Administration long ago approved ractopamine, allowing trace levels without concern, and that's sufficient for most countries. Taiwan has now dropped its zero-tolerance policy.
So, welcome to the good, bad and ugly of the international trade scene.
And of course, timing is everything. With large hog supplies on pace for this fall, the U.S. hog market could feel serious pressure if China keeps the lid on the opportunity of supplying the country with pork.
You see, China is facing serious pork shortages and extremely high prices due to "blue ear disease," which has killed more than 40,000 pigs this year. Many farmers have stopped raising the animals for fear they might be stricken by the illness, Chinese authorities say. Last year, China produced 53 million tons of pork-- more than twice as much as the world's No. 2 producer, the 27-nation European Union, according to USDA.
Pork is a staple in the Chinese diet, prices have been running as much as 86 percent above year-ago levels. It's even having an inflationary effect on the country's economy.
But, back to the United States, according to the June Hogs and Pigs Report, U.S. hog slaughter should be 1 percent to 1.5 percent higher than a year ago, but is running up 2 percent, and heavier runs are yet to surface this fall.
China is expected to get into the pork export market in a big way. U.S. analysts were hoping for its U.S. purchases to double that of a year ago. But now that's in question.
The Chicago Mercantile Exchange futures market had built some of China's potential purchases into the market. "I sure hope China comes through, otherwise we're going to see much lower prices than the futures market is predicting," says Ron Plain, University of Missouri agricultural economist.
About half of U.S. hogs are fed ractopamine, according to estimates. It's feasible that some producers, especially large ones like Smithfield, could stop feeding it in order to ship product to China. That would at least help pull some of the supply off of the U.S. market.
Of course, there's also the question of whether China can even handle significantly larger shipments of pork in terms of refrigerated storage and distribution.
Much surrounding this issue is yet to unfold, but more importantly, it's an glimpse of what could become more commonplace market hiccups.