Canadian pork exports posted a strong first four months, thanks to improved sales to Japan, South Korea, Mexico and the Philippines.
Sales to China remain significant, but are down from the same period last year, and the future of the Asian giant’s demand is uncertain because of geopolitical issues related to electric vehicles (EVs).
Chinese auto makers got into EVs much sooner than their North American and European competitors. The Chinese government provided a lot of financial support to make its producers world leaders.
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European and American governments say Beijing’s subsidies have created an industry with too much capacity, which is able to undercut EV offerings from other manufacturers.
Western government are now providing their own subsidies to help their vehicle makers catch up. But these companies can’t compete yet with artificially cheap Chinese EVs.
In May, the U.S. government protected its investment in domestic EV makers by ramping up tariffs on Chinese EVs to 100 per cent from the previous 25 per cent.
In mid-June, the European Union announced tariffs of 17.4 to 37.6 per cent on individual Chinese EV makers, depending on how much support they have received from the government in Beijing. That is on top of an existing 10 per cent duty.
Canada’s government began a 30-day public consultation on tariffs on Chinese EVs on July 2. It could go the way of the United States with a blanket tariff or the EU’s way with targeted tariffs.
Soon after the EU action, China said its pork companies had asked for an anti-subsidy and anti-dumping investigation into European pork and dairy.
It did not implement tariffs right away, and the investigation is set to last a year or more, but most observers think the Chinese investigation is a direct response to the EU tariffs on EVs.
China’s pork imports are way down from 2020 and 2021, when African swine fever devastated its producers. But they are still large, and if EU suppliers lose market share, other exporters would benefit.
However, if Canada and the U.S. have high EV tariffs, they would likely be in China’s bad books as well and not get extra business.
In 2023, China imported 1.55 million tonnes of pork and 1.17 million tonnes of pig offal. About half of it came from European exporters.
China’s imports are down even more in the first months of this year. In the January-March period, all pork product imports were down about 34 per cent compared to the same time last year.
Agriculture Canada and Statistics Canada report 64,069 tonnes were shipped to China in the January-April period, down 24.25 percent.
China was the fourth largest buyer of Canadian pork by tonnage, behind the U.S., Japan and South Korea and slightly ahead of Mexico.
Even with the reduced sales to China, Canada increased its total pork exports by 15 per cent to 508,489 tonnes in the four months.
That was thanks to a 72 per cent increase to Japan to about 102,000 tonnes and a 91 per cent increase to South Korea, to about 33,500 tonnes. Sales to Mexico and the Philippines also saw good gains. Sales to the largest customer, the U.S., slipped by 2.4 per cent to 140,600 tonnes in the period.
This year’s increase in Canadian sales to Japan is impressive.
The Japanese yen is at a 38 year low against the American dollar, causing the price of imported meat and all other goods to increase.
Unlike other major economies, in which central banks raised interest rates to battle inflation, Japan’s central bank has had near zero interest rates for 17 years in an effort to stimulate the economy and address periods of deflation.
This situation has kept a ceiling on Japan’s pork imports.
However, the competitive position of EU pork exporters in the Japanese market has been especially hurt by the tensions in the Red Sea, where Yemen’s Houthis are attacking international shipping, forcing many carriers to reroute ships around Africa and increasing transportation costs.
Also, increased environmental regulations in Europe have raised pork production costs and hurt their competitiveness.
In the first four months of this year, EU pork exports to all destinations were 1.41 million tonnes, down five per cent from last year and down 17.6 per cent from two years ago.
Its sales to Japan in the period are down 11.5 per cent from the same time last year.
So, Canadian sales to Japan appear to be benefitting from the EU’s reduction.
While things look good for Canadian pork exports this year, the future is murky because of the potential for China to put tariffs on European pork.
Such an action would cause enormous pork trade shifts that might, or might not, benefit Canada.
