The market effects of the United States’ trade issues with China and Russia over the use of the livestock growth promoter ractopamine are starting to be felt.
The U.S. dollar’s recent rally against major world currencies is also affecting trade.
The international market has become an important component of the U.S. pork sector, and the problem of access to important importers is hurting pork prices, which in turn is limiting beef prices.
Canadian livestock prices are closely linked to American trends, so the impact is felt here, too.
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Chris Hurt, an agricultural economist with Purdue University, wrote in a recent column that the volume of pork exports in 2012 represented 23 percent of total U.S. production.
Japan was the biggest U.S. pork buyer last year, taking six percent of total production. China took 3.4 percent and Russia bought 1.2 percent.
Problems in meat trade and prices are reflected in hog and cattle prices.
The estimated U.S. pork carcass cutout fell to $79.05 per hundredweight March 15 from $86.81 Feb. 1.
April Chicago lean hog futures fell to $80 March 18 from $89 per cwt. Feb. 1.
There is potential that these trade problems could stall the usual spring livestock and meat rally that accompanies the increase in meat demand as barbecue season begins in North America.
The issues with ractopamine, which is sold under the commercial name Paylean, are related partly to politics.
Analysts say Russia’s ban on American meat from animals using the product is partly retaliation against other American actions, while China’s restriction is partly driven by its efforts to support the Chinese domestic pork industry.
However, the bans are not all posturing. Taiwan and the European Union also have restrictions on meat from animals treated with ractopamine.
The situation will force the U.S. government and the livestock industry to weigh the economic cost of the loss of markets versus the economic benefits of using ractopamine,
Hurt said the recent appreciation of the U.S. dollar is also affecting pork exports. Japan’s yen has dropped 12 percent in 2013 and 16 percent since last October. That means U.S. pork prices in Japan are higher by a similar percentage.
Weaker international demand means the pork market depends more on U.S. consumers, and they are under pressure from the end of a payroll tax holiday and high gasoline prices.
The problems in pork wash over into the beef market, which had been hitting record highs in recent months because of reduced production and the small size of the North American cattle herd.
Canfax noted last week that the spread between Choice beef and pork cut-out values is the widest since 2009, with the beef value about 2 1/2 times that of pork.
Choice beef has been close to $200 per cwt. several times in the last year, but it will have trouble breaking through that barrier as long as much cheaper pork is available. Chicken is also providing strong competition.
With these limits on meat demand and prices, livestock producers’ long held hope for a return to profitability depends more than ever on lower feedgrain prices.
The early projections are that, with a return to more normal weather this spring and summer, they will get their wish.
