CHICAGO, Ill. (Reuters) – Mexico’s five percent tariff on U.S. pork will not stop imports because it will remain cheaper than pork from other sources.
The tariff is in retaliation for the United States limiting access of Mexican trucks to U.S. roads.
In three of the past five years, at least 20 percent of U.S. pork exports have gone to Mexico.
Last year, that was about four percent of U.S. pork production, but enough that Mexico will be hard-pressed to replace it from other sources at competitive shipping rates.
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As a result, analysts expect a quick resolution of the trade dispute, with the tariff removed, or else they say Mexico will keep buying U.S. pork despite the tariff.
“It is something the trade is confident will be worked out sooner rather than later,” said Don Roose, analyst with U.S. Commodities.
The dispute comes at time when U.S. pork prices are near the record high of $94.41 US per hundredweight set in 2008. Analyst expect prices to surpass that record soon because of this year’s smaller supplies and strong exports.
United States Department of Agriculture forecasts total U.S. pork exports will be up nine percent this year, while production will be down about 3.3 percent.
Rich Nelson, analyst at the advisory firm Allendale Inc, estimated the tariff “at worst may knock off five percent” of U.S. pork exports to Mexico.
Canada supplies some pork to Mexico, but Canadian pork production has been declining, and Canada may find it hard to replace the volume of pork the U.S. ships.
“The reality is a lot of the reason that they buy so much from us is the proximity. It is a shorter haul,” said Ron Plain, University of Missouri agricultural economist. “
A five percent tariff is not going to be big enough to cause them to stop buying U.S. pork.”
Chicago livestock traders dismissed the tariff’s impact and focused on smaller U.S. pork supplies and near record high pork prices.
While the U.S. could lose of a portion of the Mexican business, traders believed it would not send U.S. hog or pork prices much lower, largely because of tight supplies.
Pork production is down this year primarily because U.S. hog producers have reduced herds after years of losses.
