International trade fuels pork market

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The economic outlook may be a bit better now when compared to last year's poor pork market.

An economic update was delivered by Steve Meyer, president of Pargon Economics, during a press conference held at World Pork Expo on Thursday. Meyer sounded optimistic about the pork market after hog margins have just now reached black ink since last summer.

He said there is always the chance for a market meltdown, "There's always a risk of it, but the risk is pretty small."

Mandatory Country of Origin Labeling (MCOOL) has been at the forefront of many discussions about trade, specifically with U.S. trading partners Canada and Mexico.

"I would be surprised if WTO (World Trade Organization) says that it solves the problem, because I think it makes it worse," says Meyer.

He said that trade tariffs could be in future for exports.

"It will probably be sometime next year that we see tariffs applied."

When looking at export markets it is hard to ignore the recent acquisition of Smithfield by the Chinese company Henan Shuanghui Development.

Meyer thought exports to China were going to grow any way, but all that purchase does is increase the potential for growth in exports.

He believes that U.S. pork will be the first resource utilized in this partnership, but that the knowledge base from Smithfield is going to be the best benefit for China's domestic pork production.

"The know how is what I think they are really tapping into," added Meyer.

There are concerns on the international trading block when analyzing exchange rates.

"The biggest concern on the exchange rate front is the value of the Yen (Japan)," says Meyer.

Japan is the largest market for pork exports, so a weak Yen is concerning for trade.

Ractopamine is certainly another issue affecting trade with some countries like China and Russia.

"There are some markets that are going to be risky from a political standpoint and Russia is one of them," says Meyer.

However, he said that we are working with China on the use of Ractopamine in our swine herd and the Smithfield purchase can help bridge that gap. Cutting out the use of Ractopamine for exports to China is one of those ways to solve the problem, but some packers may have a difficult time doing this.

"Those packing companies that are not as vertically integrated as Smithfield have difficulty controlling their product," added Meyer.

Never the less, with the pork market finally at a breakeven point producers have something to be hopeful for and international markets will only help boost those margins.



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