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Trade concerns may cause rising pork production challenges

A domestic backlog of product may lead to lower prices

Uncertainty surrounding the United States’ future involvement in global trade pacts could put retailers in a precarious position after the pork industry prepped itself for increased production over the past year.

Chip Whalen, vice president of education and research at Commodity & Ingredient Hedging LLC, cited 6.5% growth in the domestic sow herd in order to keep pace with the opening of new processing plants throughout the country. 

“A lot of this expansion was done with the idea that we’re seeing a growth in global demand, and the U.S. is well placed to take advantage of that,” said Whalen.

“There are certainly a lot of headwinds too,” he added. “The biggest thing that people are concerned about right now is the renegotiation of these trade agreements, particularly NAFTA. “

Whalen also said that the U.S. exit of the Trans-Pacific Partnership compounded the concerns. He pointed out that Mexico currently imports about one-third of the pork that America exports, with about 25% of the haul being sent to Japan. 

The upheaval could leave pork suppliers competing with other countries from Europe or with Canada that can supply a similar product with less tariffs attached.

“We’re much more dependent on pork exports today than we were historically,” said Whalen, who warned that if foreign trade uncertainty causes a “big loss of market share overseas,” the backlog could force retailers in the U.S. to lower prices in order to move the supply. 

The U.S. formally removed itself from the Trans-Pacific Partnership at the orders of President Trump during his first days in office. There is a belief that NAFTA could see a similar outcome due to the President’s noted distaste for the program.

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Twitter: @DanAMX

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