DES MOINES, Iowa — Mexican tariffs won’t shut the Mexican border to U.S. pork, American hog analysts and industry officials predict.
They will hurt American farmers and packers, but fresh pork from the United States will continue to flow south despite the Mexican response to U.S. steel and aluminium tariffs.
“I think the supply and demand dynamics are such that we’re still going to be a very reliable customer, on certain key products especially,” said Dan Halstrom, the president of the U.S. Meat Export Federation, in an interview at the World Pork Expo.
“I think the business continues.”
Mexico consumed 800,000 tonnes of U.S. pork in 2017, representing 25 percent of total exports. It is a major market for shoulders and variety meats, which are often hard to move, so its value as a market goes beyond gross tonnage.
So far, U.S. pork imports have just faced a 10 percent retaliatory tariff, but that rises to 20 percent on July 5.
While those tariffs will boost the price of U.S. pork to Mexican processors, many can’t easily switch to other sources, said hog market analyst Steve Meyer.
“We don’t think that frozen hams are a direct substitute,” said Meyer in an interview.
Mexico is a huge consumer of fresh U.S. hams. Frozen hams are available from many global suppliers, but if processors are set up to use fresh meat they can’t swap out fresh for frozen.
“You’ve got to have way more space,” said Meyer.
Frozen hams need to be thawed and prepared properly in order to replace fresh hams and most Mexican plants aren’t set up that way.
“If you bring in frozen hams … that can be a multi-day process,” said Meyer.
With the U.S. situated next door to Mexico, and even Canada facing higher transportation costs, Meyer and others see American pork still being competitive under tariffs.
“I think there’s a very good chance that at a 10 percent tariff the United States is still the low-cost supplier of hams to the Mexican processor (but) at 20 percent that gets much more shaky,” said Meyer.
Many U.S. industry players and farmers appear to be assuming President Donald Trump’s trade wars are just a negotiating tactic that will soon be resolved.
That’s why National Pork Board vice-president for International Marketing, Craig Morris, described himself as optimistic about U.S. pork exports this year, despite the Mexican tariffs.
“I do think that’s a short- to medium-term problem,” said Morris in an interview.
“I think all of our producers are very confident in the administration to get some sort of deal worked out.”
Meyer shared that hope, but admitted the situation has gotten worse than he had hoped.
“At the end of the day, there’s too much at stake here for the country and I hope the president and his people recognize that,” said Meyer.
Permanent changes to Mexican demand aren’t likely for a while, but they could happen in a protracted trade war.
“It would have to be several months with no real solution in sight,” said Meyer.
When would the outlook for U.S. exports to Mexico permanently darken?
“If (the U.S. administration) announce they’re terminating the NAFTA I’d get really, really scared,” said Meyer.