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Pork Commodity Outlook: the international dimension

Pork Commodity Outlook: the international dimension. Presentation to Vietnamese Officials by Monte Vandeveer, ERS/USDA February 2006 Hanoi. Why look at international hog and pork markets?. Find benchmarks for industry performance, for example: Costs of production

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Pork Commodity Outlook: the international dimension

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  1. Pork Commodity Outlook:the international dimension Presentation to Vietnamese Officials by Monte Vandeveer, ERS/USDA February 2006 Hanoi

  2. Why look at international hog and pork markets? • Find benchmarks for industry performance, for example: • Costs of production • Structural changes in production and consumption • ‘World’ prices for pork cuts • Marketing strategies • Find export opportunities • Find import opportunities

  3. Largest hog and pork producers • China • EU • USA • Brazil • Vietnam • Source: FAOSTAT.

  4. Largest pork exporters • EU-25 • USA • Canada • Brazil • China • FAOSTAT, 2004.

  5. Largest pork importers • Japan • USA • Russia • Mexico • S. Korea • China • FAOSTAT, 2004.

  6. What is traded? • Primarily frozen, boneless cuts of pork • Secondary markets: • Carcasses (e.g., Vietnam piglets to Hong Kong) • Bone-in cuts (e.g., ribs) • Offals or organ meat (e.g., hearts, skin) • Chilled (cold but not frozen) meat trade is expanding

  7. Disease rules create trade zones • Foot and mouth disease (FMD) is a major factor determining trade flows • Old FMD-free zone: Japan, Korea, Taiwan; Canada, USA; Denmark; Oceania • Chilled and frozen pork trade among these countries, but not with others • Mexico is joining this group • Rest of world: Russia, Hong Kong are the leading importers; Brazil the leading exporter • Processed pork (e.g., canned ham) can be traded; cooking kills FMD virus

  8. Trade in cuts • Because most trade is in cuts, think about supply and demand for each cut, rather than for the carcass • Some countries like some cuts better than other cuts • Some countries value offals, some don’t • Trade takes cuts to the market that offers the highest value.

  9. Example • Japan likes dark chicken meat (such as leg) • Dark meat has higher price in Japan than white meat • US likes white chicken meat (such as breast) • Dark meat has lower price in US than white meat • US ships dark meat to Japan • Dark meat gets a higher price in Japan than in US

  10. Hypothetical example • Country A produces a hog for $100 • Country B produces a hog for $50 • Country A won’t use pigs’ feet; price in A is $.01 • Country B uses pigs’ feet; price in B is $.50 • Country A ships pigs’ feet to Country B • Even though cost of hog production is much higher in Country A

  11. A hog is the sum of its parts • Market value of a hog is the sum of the price received for each part • Exports of one part raise the value of that part in the exporting market, and thus the value of the hog • Imports of one part lower the value of that part in the importing market, and thus the value of the hog

  12. Trade in cuts or parts leads to intra-industry trade • Many countries import and export pork • Normal condition • Tastes are different between countries • Production costs are different between countries • Consumers are better off because of trade • For producers, trade impact varies • Good idea to examine foreign markets for demand for certain cuts/parts, and processed products

  13. Vietnam trade in pork • Exports: • $31 million in 2004 • $25 million in 2005 (incomplete data) • 12,000 tons, carcass weight • Imports • $4 million in 2004 • $15 million in 2005 (incomplete data) • 8,500 tons, carcass weight equivalent (using many assumptions) • Source: Global Trade Atlas

  14. What Vietnam trades • Exports: primarily carcasses to Hong Kong (piglets?) • Imports: primarily sausages from USA (may not be all pork) • Many other trade flows possible in future • Look at China, Philippines

  15. What Philippines imports • 2004: • Pig skin with fat--$10 million • Offal--$8 million • Muscle cuts--$8 million

  16. China’s trade • Imports • Mostly organ meat (hearts, etc.) • $291 million in 2004 • $204 million in 2005 • 281,000 tons, carcass equivalent, in 2005 • Exports • Mostly pork meat • $780 million in 2004 • $790 million in 2005 • 583,000 tons, carcass equivalent, in 2005 • Hong Kong, Japan, North Korea biggest markets

  17. Factors in global competitiveness • Genetic base • Feed costs • Disease control • Processing capacity • Labor • Capital • Marketing skills

  18. Feed critical factor for hog production: corn supply and demand

  19. Feed, continued:soymeal imports and use

  20. Vietnam tariffs • Corn: 5% • Soymeal: 5% • Pork • ASEAN: 5% • China: 10% • Rest of world: 30% • Low feedstuff tariffs help livestock industries in Vietnam

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