Mexican pork tariff adds
to market’s uncertainty
MICHELE F. MIHALJEVICH
D.C. — Mexico has put a tariff on U.S. pork products
exported to the country, as the trucking dispute between
the two nations continues.
hams will be charged a 5 percent tariff and pork rinds,
20 percent, according to an updated list of U.S. goods
subject to tariff by the Mexican government. The tariffs
went into effect Aug. 19.
to pork, other new U.S. products on the list include
meats, fruits and vegetables, chocolate and chewing
gum. The list now totals 99 items.
instituted the tariffs in March 2009 in response to
the discontinuation of a pilot program by the United
States that was designed to meet the country’s North
American Free Trade Agreement (NAFTA) obligations, according
to the U.S. Chamber of Commerce.
trucks from both countries were supposed to be granted
full access to roadways in each country, but the U.S.
did not give access to Mexican carriers until the pilot
program began in 2007. The program granted access to
a limited number of Mexican trucks that were required
to undergo a rigorous inspection program, the Chamber
said. The program ended in March 2009 after Congress
terminated the funding.
the largest market in volume for U.S. pork, accounting
for 20 percent of U.S. pork exports, said Nick Giordano,
vice president and counsel for international affairs
for the National Pork Producers Council. Processed hams
are the single largest U.S. pork product in volume exported
to Mexico, he added.
makes us less competitive,” he explained. “While pork
rinds are a much smaller percentage of trade, with the
20 percent tariff, we’re getting whacked pretty hard
on that product.
a positive development. Canadians and Chileans can continue
to ship their goods to Mexico at a zero tariff. This
makes Mexican domestic producers and foreign competitors
industry’s success in exporting to Mexico under NAFTA
is one of the reasons pork was added to the tariff list,
Giordano said. “It’s a miracle we weren’t on the original
list. This is detrimental to the interests of pork producers.
More in the U.S. will lose jobs and exports associated
within its rights to begin the tariffs, he said.
needs to implement its obligations under NAFTA on trucking,”
he explained. “The U.S. needs to live up to its trades
deal. Less exports because of this retaliation by Mexico
equals less jobs.
shown a lot of restraint, but they finally threw up
their arms and retaliated. We’re on the list now and
that’s not a good thing.”
situation brings uncertainty to an already bearish outlook
for pork, said Shawn Hackett, president of Hackett Financial
won’t impact the market as much as other things, it
will reduce the demand for pork even more,” Hackett
noted. “Overall in the world and in the U.S., we have
a challenged and decelerating economy. There’s a rough
patch coming up and there will be a lower demand for
pork and beef.”
rebounded recently from 12 to 18 months ago when they
were historically low, as the industry dealt with the
economy and the H1N1 flu – also called the “swine flu”
– he noted.
a massive liquidation (of stock), and created a lot
of hardship,” he said. “Then, demand started to get
back to normal but the supply was less. It created a
pretty positive prices for a while, but now we’re starting
to see a bulge in supply again. Some are saying demand
will remain pretty good, but I think they’re wrong.”
producers lock in prices now, at a higher level, before
they begin to fall.
extension economist in the Department of Agricultural
Economics at the University of Missouri-Columbia, is
bullish on the industry, at least for the next year
is good right now. We lost a lot of money raising hogs
in 2008, 2009, but we tightened the meat supply. While
production will increase from summer into fall, and
prices will fall, I expect to see production drop off
again in 2011 and prices go back up,” he said.
about 80 cents a pound for lean carcass weight and 61
cents a pound for live, he said, adding he expects carcass
prices to drop to about 70 cents in November and December,
with live prices dropping to about 52 cents.
making good money this summer and break even at the
end of the year,” he said.
the industry had in the last couple of years came at
a time when there were a lot of hogs, he said. “Lots
of things went wrong in 2008 and 2009. There were high
feed prices, and low demand due to the recession and
the ‘non-swine flu scare.’ But feed costs have moderated,
demand has picked back up and a lot of herds were downsized,
so there’s a lot less pork.”
116.5 million hogs were slaughtered in the U.S., Plain
said. This year, the forecast is for 109.65 million
hogs to be slaughtered, a decrease of 5.9 percent from
2008. While Plain is bullish for the next year or so,
he said he expects changes by the second half of 2011
and into 2012.
said that pork producers can’t stand prosperity, so
when they make money for too long they decide to raise
more hogs,” he said.
numbers will start to go up in the second half of next
year and will increase significantly in 2012, he said,
adding he expects to see lower prices by 2012. The tariff
issue will cause Mexico to buy less pork from the U.S.,
a variety of products in hopes those industries would
put pressure on our government,” Plain explained. “You
don’t put a tariff on a product and keep buying more.
They’ll buy a little less, but I don’t see it falling
off the table by any means.
a lot of pork from us because we’re close. Others will
be glad to sell them pork. But with other countries,
it’s a question of if the tariff is high enough to offset
shipping costs from another country.”
tariff will cause an impact but it shouldn’t be a huge
one, said Shane Ellis, extension livestock economist
at Iowa State University. “It will be an issue, but
I’m not saying the sky is falling. It’s a little dip
in the road that may cause a little bit of a ripple,”
and U.S. producers will all be affected, he said, adding
consumers might have to pay a bit more for U.S. products.
in hogs over the last year or so will help the industry,
Ellis said. “The supply of pork will be down in the
fourth quarter, and we’ll have better prices and maintain
some profitability. Projections show it looks profitable
through the end of this year.”
are currently in the low 80s-cents per pound for lean
carcasses, and are projected to be in the upper 70s
in September and October, Ellis noted. He expects them
to run in the low 70s from November through January,
but expects them to increase to the mid-70s in early
spring, and to the mid-80s by June.
exports are up 8 percent over a year ago, he said, adding
exports will continue to look strong unless there’s
a global recession.