“We are just days from the end of the first quarter and we are starting to see more clearly the opportunities and challenges for US red meats moving forward this year,” Haggard said. “There are several key drivers at work in the Asian theater [regarding pork]. First, the US dollar is particularly strong and a strong dollar means weak currencies for the importing countries in Asia and also our competitors, including Europe and Brazil. On top of this, we see weak European pork prices in Euro terms.”
Meanwhile, Domestic pork prices in Japan and Korea, two of the US’ major importing destinations, are up 15 to 20 percent. “We hope this will translate into overall increased imports, but we’ll likely be fighting it out with the Europeans this year for some of the commodity frozen pork business that moves based on prices,” he said.
In China, suppliers face ample domestic pork supplies and somewhat sluggish demand. “We also continue to watch China closely; that country’s imports are up 6 percent year-in-year despite soft domestic prices,” Haggard said. “Everyone who watches the China market was surprised by the lackluster demand of this year’s Chinese New Year, which took place in mid-February. But everyone is hoping that things turn bullish in the second half.”
Official data released by Chinese authorities indicates large reductions in total hog inventories in sows. But the market is not yet showing signs this will translate into tighter supplies, Haggard continued. “Layered over this is an economy that although growing by 7.5 percent, which is definitely envious by any other country’s standards, is much weaker than in recent years,” he concluded.