Rapid Start to 2020 for U.S. Pork Exports; Beef Exports also Trend Higher

Following a record-breaking performance in 2019, U.S. pork exports maintained a torrid pace in January, according to data released by USDA and compiled by USMEF. January beef exports were also higher year-over-year, while exports of U.S. lamb trended lower.

January pork exports cooled slightly from the volume and value records established in December 2019, but still far exceeded year-ago levels. Both the January export volume of 273,603 metric tons (mt), up 36% year-over-year, and export value ($738.7 million, up 50%) were the second highest on record. Export value per head slaughtered was $62.53, up 40% from a year ago. Exports accounted for 29.8% of total pork production and 27.4% for muscle cuts only, up substantially from last January's percentages (23.6% and 20.3%, respectively).

Beef exports posted more modest growth in January, increasing 2.5% from a year ago in volume (107,374 mt) and 5% in value ($672.7 million). But beef muscle cut exports were the highest ever for the month of January at 81,342 mt, up 4% from a year ago, while muscle cut value increased 5% to $589.2 million. Export value per head of fed slaughter was $302.93, up 3% from a year ago. Exports accounted for 13.1% of total beef production, down slightly from a year ago, and 10.6% for muscle cuts only (steady with January 2019).

Release of the January export data comes as coronavirus is dominating news headlines, including those related to global trade. USMEF President and CEO Dan Halstrom said the virus has had an impact on red meat exports, which will likely be more evident in February and March data, but a number of supply and demand fundamentals and market access improvements have underpinned continued strong export volumes.

"The first quarantine actions in China were taken in late January and the calendar had turned to February before coronavirus became a major health concern in countries such as South Korea and Japan," Halstrom said. "But despite logistical challenges, a severe decline in tourism and a notable impact on sit-down dining, overall demand for red meat in these markets is quite resilient. Retail meat sales have remained strong and both retailers and restaurateurs are utilizing e-commerce and delivery services at unprecedented levels. While it's definitely a challenging situation, the Asian food industry is adapting to these conditions and finding creative ways to accommodate consumers."

Pork exports to China/Hong Kong soar, but it's not the only star performer

Pork exports to China/Hong Kong continued on a blistering pace in January, easing somewhat from the record volume reached in December but still increasing 263% from a year ago to 97,002 mt and climbing 361% in value to $245.3 million. The year-over-year increase was even more astonishing for pork muscle cuts, which were up 814% to 76,281 mt, valued at $194.7 million (up 1,297%). January exports included a significant share of carcasses (boxed primals), which totaled 35,358 mt, up from zero last year. Exports of bone-in hams and shoulders were 7,750 mt, up 569%.

Exports to Mexico, which were hampered by retaliatory duties in the first five months of 2019, increased 6% from a year ago in volume (70,460 mt) and jumped an impressive 40% in value to $134.7 million. Chilled bone-in ham and shoulder cuts remained the largest category for Mexico, totaling 42,542 mt, up 11% from last year and accounting for 75% of the chilled/frozen cut volume. Unit export values for pork cuts exported to Mexico were up 36% from last January.

"The January data really underscore the difficult situation U.S. pork was facing in Mexico a year ago," Halstrom said. "Exporters kept much of the volume moving, but the U.S. industry absorbed most of the 20% duty in the form of lower prices. With duty-free access restored and the U.S.-Mexico-Canada Agreement moving toward implementation, we look forward to a continued rebound in Mexico's demand for U.S. pork."

January shipments to Japan, the perennial value leader for U.S. pork exports, were down 4% from a year ago in volume (31,578 mt) and 2% lower in value ($132.6 million). But Japanese import data paint a brighter picture, showing imports of chilled U.S. pork were up 13% to 17,890 mt. Imports of ground seasoned pork were record-large at 12,944 mt, up 95%, illustrating the importance of a restored level tariff playing field. USMEF projects an upward trend in Japan in 2020, due in part to tariff relief provided in the new U.S.-Japan trade agreement. The next round of tariff reductions will come April 1, when the Japanese fiscal year begins.

Other January highlights for U.S. pork exports include:

• Exports to Oceania, which were record-large in 2019, continued to climb, reaching 11,961 mt (up 29% year-over-year) valued at $38.5 million (up 55%). Exports to Australia set a new record in January, reaching 10,723 mt (up 29%) valued at $34.1 million (up 53%). Australia and New Zealand are key markets for hams and other muscle cuts used for further processing and value-added U.S. processed products are also rapidly gaining popularity.
• Pork exports to Canada were 18,767 mt in January, up 16% from year ago, while value increased 14% to $66.2 million. Canada's pork exports to China resumed in November after a five-month suspension, so tighter domestic supplies should translate to expanded opportunities for U.S. pork again in 2020.
• Exports to Vietnam, where domestic production has been heavily impacted by African swine fever, increased 137% from a year ago to 1,105 mt, valued at $2.1 million (up 23%). Vietnam's demand for U.S. pork variety meat increased significantly in the second half of 2019 and that trend continued, with variety meat exports accounting for 44% (490 mt) of the January volume.

Taiwan, Mexico lead January beef export growth

The value of U.S. beef exports to Taiwan was record-high for the seventh consecutive year in 2019, and exports are off to a great start in 2020. January exports to Taiwan increased 24% from a year ago to 5,226 mt, valued at $43.5 million (up 18%). The United States dominates Taiwan's chilled beef export market, capturing 75% market share last year and 83% in January 2020.

"The Taiwanese market is a remarkable success story for U.S. beef, especially for a country with fewer than 25 million residents," Halstrom said. "U.S. beef has an ever-widening footprint in Taiwan that goes way beyond high-end dining and retail. By introducing a wider range of cuts, the U.S. industry and its importers and customers are finding new ways - including exciting new retail packaging and merchandising techniques - to capitalize on growing demand in Taiwan and make U.S. beef available to more and more consumers."

January beef shipments to Mexico were up 4% from a year ago to 21,992 mt, while value jumped 15% to $117.2 million. Mexico is the largest destination for beef variety meat exports, which increased 9% to 9,438 mt, valued at $26.7 million (up 14%).

Coming off a record year in 2019, exports to South Korea remained strong in January, though volume was down slightly from a year ago (17,794 mt, down 1%) and value dipped 3% to $130.6 million. However, U.S. beef continues to capture greater market share in Korea and the outlook remains positive for export growth in 2020, despite Korea's current economic challenges.

Beef exports to leading market Japan, which are also benefiting from lower tariff rates this year, declined 3% from a year ago in January to 25,205 mt, valued at $158.1 million (down 5%). On a more positive note, import data show chilled beef volume to Japan increased 14% to 10,686 mt. The tariff rate for U.S. beef muscle cuts dropped from 38.5% to 26.6% on Jan. 1 and will decline to 25.8% on April 1, the same rates imposed on major competitors in Japan.

Other January highlights for U.S. beef exports include:

• Exports to the Middle East jumped 16% to 6,464 mt, valued at $17 million (up 12%). Variety meat exports to Egypt (primarily livers) make up most of the U.S. export volume to the region, but January results were also bolstered by larger muscle cut exports to Israel and Saudi Arabia.
• Led by steady growth in the Dominican Republic and a large increase in the Bahamas, exports to the Caribbean were up 3% from a year ago to 2,212 mt, while value increased 15% to $16.3 million.
• Beef exports to China continue to develop, with January volume reaching 876 mt (up 7% year-over-year) valued at $6.5 million (up 4%). However, the market access gains included in the U.S.-China Phase One agreement have not yet been implemented. This agreement will significantly expand the percentage of U.S. beef eligible for export to China and holds outstanding potential for the U.S. industry.

January lamb exports trend lower, but muscle cut value rises

January exports of U.S. lamb were down 31% from a year ago to 959 mt, but value declined only slightly ($2.1 million, down 1%) as lamb muscle cuts commanded better prices. January muscle cut exports were down 12% from a year ago to 215 mt, yet value increased 10% to $1.3 million. Muscle cut value growth was mainly driven by Mexico, but also increased to Bermuda, Jamaica and Egypt.

Complete January export results for U.S. beef, pork and lamb are available from USMEF's statistics Web page.

Monthly charts for U.S. pork and beef exports are also available online.

If you have questions, please contact Joe Schuele or call 303-547-0030.

NOTES:

• Export statistics refer to both muscle cuts and variety meat, unless otherwise noted.
• One metric ton (mt) = 2,204.622 pounds.
• U.S. pork currently faces retaliatory duties in China. China's duty rate on frozen pork muscle cuts and variety meat increased from 12% to 37% in April 2018, from 37% to 62% in July 2018 and from 62% to 72% on Sept. 1, 2019. The rate on pork cuts was reduced to 68% on Jan. 1, 2020, through a reduction in the most-favored-nation (MFN) rate and to 63% on Feb. 14, 2020, through a reduction in the Section 301 retaliatory duty. The duty on pork variety meat was reduced to 67% on Feb. 14.
• U.S. beef faces retaliatory duties in China. China's duty rate on beef muscle cuts and variety meats increased from 12% to 37% in July 2018 and from 37% to 47% on Sept. 1, 2019. It was reduced to 42% on Feb. 14, 2020.
• In February 2020, China announced a duty exclusion process that allows importers to apply for relief from duties imposed in response to U.S. Section 301 duties. When an application is successful, the rate for U.S. beef can decline to the MFN rate of 12% and the rate for U.S. pork can decline to 33% for muscle cuts and 37% for pork offal (the 25% Section 232 retaliatory duty on U.S. pork remains). Some importers reported receiving duty relief beginning on March 2, 2020.
• Mexico's duty rate on pork muscle cuts increased from zero to 10% in June 2018 and jumped to 20% the following month. Beginning in June 2018, Mexico also imposed a 15% duty on sausages and a 20% duty on some prepared hams. Mexico removed all duties in late May 2019.