Pork and Allied Industries Committee Report

by Randy Spronk

Randy Spronk

The USMEF Pork and Allied Industries Committee met Nov. 5 at the USMEF Strategic Planning Conference in Tucson. The meeting opened with National Pork Board (NPB) President Derrick Sleezer providing an industry update. He recapped recent trends in production growth, noting that 2014 was a difficult year but the industry now has a much better handle on PEDV and this has helped boost production to record levels in 2015 and likely again in 2016. Sleezer also summarized the new pork industry strategic plan, which focuses on building consumer trust, driving sustainable production and growing consumer demand. More details on the strategic plan are available on the NPB website.

Sleezer noted that antibiotic use is a key focus for consumer trust. Despite a big push from some parties to move to zero antibiotic use, this is not acceptable or realistic for the industry. Therefore, proper use of antibiotics is a major priority in the industry’s research and producer education efforts. The industry must also be proactive in all policy-making proceedings regarding antibiotics and ensure that the industry “leads the conversation” on antibiotics.

Sleezer explained that the common swine industry audit is also an important tool for building consumer trust, and that the industry went to great lengths to construct a framework that is workable, credible and verifiable when it comes to on-farm practices.

“We didn’t want multiple, different audits, so we worked very hard to come up with consistent standards to make sure it is reliable, verifiable, and doing what is best for the animals,” he said. “We also wanted to make that we are able to train the auditors, to ensure that we have a very consistent process throughout the industry.”

NPB’s international marketing goal is to grow exports 9 percent per year through 2020.

“We understand that this is a very ambitious goal and it will require a lot of work,” Sleezer said. “But in order to keep our industry growing, we need to keep exports growing as well.”

NPB is particularly focused on growing demand for U.S. pork in Asia and Latin America, and continues to work closely with the National Pork Producers Council (NPPC) and other industry partners to reduce market access barriers.

Dan Halstrom, USMEF senior vice president for marketing, gave the committee a summary of USMEF’s Strategic Market Profiles (SMPs). He explained a component in USMEF’s preparation of the SMPs – the use of industry workshops to gather input in preparation of the Unified Export Strategy (UES). The workshops, which were held in April, allowed for broad participation in setting priorities for the use of USDA Market Access Program and Foreign Market Development program funding, and were very well received by those in attendance. Similar workshops are planned in 2016.

Halstrom explained how market development takes place in all international destinations for U.S. pork, but differs according to the maturity of the market. In markets that are fairly new, most of the focus is on importers, distributors and further processors. But in those markets in which U.S. pork has a more established presence, USMEF tailors marketing activities to fit a broad range of retailers and food service outlets and employs a higher level of consumer outreach.

In Japan and other major Asian markets that have seen a recent influx of European pork, Halstrom explained USMEF’s efforts to displace the competition and recapture market share. In Mexico, the main focus is to defend U.S. market share and continue to grow overall consumption. Halstrom and USMEF Economist Erin Borror each noted that Mexico’s per capita pork consumption has grown robustly in recent years, but emphasized that there is room for further growth. Despite the weak peso, demand for U.S. pork remains very strong in Mexico and the market continues to perform extremely well.

Turning to South Korea, Halstrom noted that U.S. pork has a very strong presence in the processing sector but is making greater inroads with the retail and foodservice sectors. He explained that Korea’s processing sector holds particularly strong potential for U.S. pork shoulder butt, and this was an area of emphasis in a recent round of supplemental funding from the Pork Checkoff. USMEF is also achieving success in Korea with finished processed products and home meal replacement items.

Halstrom also gave a progress report on USMEF’s initiative to grow demand for U.S. pork in Sub-Saharan Africa, including an inaugural showcase and seminar held in September in Ghana. He explained that several countries are included in the initiative, but the most promising destinations in the near term are Ghana, Benin and Angola. He also noted that while Russia remains closed to most U.S. pork products, USMEF is working to identify opportunities in other countries in the Greater Russia region. At the conclusion of this discussion, the committee voted unanimously to approve the SMPs.

Borror gave the committee an overview of global pork production and trade trends, with a particular focus on the European Union. It has been nearly two years since Russia closed to pork from the EU due to an impasse over African swine fever. Since that time, large volumes of low-priced EU pork have entered other international markets, especially in Asia, altering the landscape of global pork trade.

Borror explained that the reason EU prices are so low is not just the loss of the Russian market, but also that year-over-year production was up more than 4 percent in the first half of 2015. While production is finally slowing, it will still end the year up 2.7 percent. Another modest increase of about 0.4 percent is expected in 2016.

“So even though you’ve read about the dairy and pork producer protests in Europe and the European Commission is looking at what it can do to bail out the producers, we still expect a modest uptick in production next year,” Borror said. “The euro also softened again recently and that helps give the EU an additional edge. But even in euro terms, their prices are about 13 percent below the five-year average.”

Borror further noted that European producers seem to be weathering this period of persistently low prices much better than expected, with the EU industry becoming more consolidated and efficient. She said that among major producing countries, France has been hit the hardest due to a less efficient processing sector and high labor costs.

“So France would be one area to watch if you want to look for a pullback,” Borror explained. “But otherwise EU competition is here to stay, and they’ve already become quite entrenched in our markets.”

Borror pointed out that pork supplies among major producing countries are generally higher this year, with the exception of China. Even in China the decline is more modest than many anticipated, as greater efficiency in production has partially offset the decline in China’s sow herd.

An exporter discussion panel added an interesting new element to this committee meeting, as members received “front line” insights from Mark Boyd of Porky Products, David Peterson of Seaboard Foods, John Donofrio of Interra International, Bob Giertz of CANAMMEATS. They discussed near-term opportunities in key Asian markets such as Japan and Korea, and noted that China is ripe for growth if reliable market access is achieved. Mexico was also discussed as a very critical, high-volume market.

The group reiterated the intense competition U.S. pork faces from the European Union in Asian markets, due in large part to the closure of the Russian market. They noted that the EU is also eyeing Latin America as a region of potential growth. Lack of access to Russia has also pushed a large volume of Canadian pork into Asia, Latin America and Oceania. The West Coast labor impasse was also discussed, with exporters stating that some of the business lost during that time still has not been recovered.

When asked to name a single market access barrier they would most like to see eliminated, the panelists identified ractopamine restrictions, the Russia-EU pork trade impasse and difficulties with China regarding in-lieu-of certificates as major impediments.

The committee also received interesting insights from USMEF’s international staff, including reports from China/Hong Kong, Southeast Asia, Oceania, Japan and Korea. Joel Haggard detailed the remarkable growth in e-commerce in China, with online orders of pork expanding rapidly. Sabrina Yin touched on growth opportunities in Malaysia, which finally opened to fresh/frozen U.S. pork in late 2014. While Malaysia is a predominantly Muslim country, pork consumption among the non-Muslim population is very strong. She also explained the introduction of U.S. pulled pork and other pre-cooked products into Australia, and retail-ready pork products into New Zealand. Takemichi Yamashoji discussed USMEF efforts to displace competition in Japan, and Jihae Yang outlined growth opportunities and competitive challenges in the Korean market.

Nick Giordano, NPPC vice president and counsel for global government affairs, provided an update on a number of key policy issues, including the potential benefits of the Trans-Pacific Partnership (TPP), ongoing efforts to gain market access for U.S. pork in South Africa and the country-of-origin labeling dispute with Canada and Mexico.

Idaho cattle producer Cevin Jones reported to the committee that a resolution supporting ratification and implementation of TPP had been approved by the Beef and Allied Industries Committee. The resolution, which is available online, notes that without TPP, the U.S. could face significant disadvantages in key markets, as competitors move forward with trade agreements. For the pork industry, this concern especially rings true in Japan, where FTA negotiations between the EU and Japan are expected to conclude in 2016. The EU also recently signed an FTA with Vietnam, which will be implemented in 2016 or 2017. The committee voted unanimously to support the resolution and was made a co-introducer along with the Beef and Allied Industries Committee.

Randy Spronk is a pork producer from Edgerton, Minnesota, who chairs the Pork and Allied Industries Committee and represents the pork producing and feeding sector on the USMEF Executive Committee.