Trade war pulls pork prices down for Minnesota farmers

REUTERS/Daniel Acker
The falling price of pork is worrisome for pig farmers in Minnesota, one of the biggest swine-producing states in the U.S.

Greg Boerboom has been watching the price of pork on commodities markets with a more-than-usual amount of trepidation of late.

In the span of last week, the sale price the second generation Marshall, Minnesota family farmer can get for a pig dropped by about $12.

That’s just the latest decrease. In recent months, the $165 sale price Boerboom was getting for a pig has dropped to the $145 range, thanks in part to new tariffs China and Mexico have placed on pork products, in retaliation for U.S. tariffs on products like steel and aluminum.

The falling price of pork is worrisome for pig farmers in Minnesota, one of the biggest swine-producing states in the U.S. And things are not looking up: Futures, prices predictions about where prices will go in the coming months, suggest a drop to around $120 per head by December, Boerboom said.

New tariffs

The U.S. pork industry had been experiencing some fat years recently, with production ramping up. Pork producers had it good. Different markets have developed tastes for different cuts of meat: China takes pork belly and picnic (the lower shoulder), and Mexico takes the hams, Boerboom said. In the U.S., people are big eaters of pork shoulder and bacon, which comes from the belly.

“Every country and everybody wants something different when you break the pig down,” he said.

Then came the tariffs, a response to President Donald Trump’s efforts to bolster homegrown industries. Last month, Mexico increased tariffs on U.S. pork imports to 20 percent, while Chinese taxes on pork imports from the U.S., increased in July, are now more than 70 percent.

“The last few years (have) been great. We’ve had some real good years, real profitable years and productive years,” Boerboom said. “Right now, they’re tough. The market has dropped dramatically in the last month or so.”

The price of lean hog dropped about a third since early July, according to data from Business Insider. About 30 percent, or $717 million, of Minnesota pork was exported abroad in 2016, the most recent year of data available, according to the Minnesota Department of Agriculture.

The U.S. Department of Agriculture is reporting higher volumes of some pork products, including pork belly and trimmings stockpiled in cold storage facilities. Pork industry watchers fear stockpiles will increase due to falling foreign demand.

Boerboom says his farm hasn’t adjusted the number of pigs it produces in response to the tariffs, but his family has dropped the weight of pigs ready for sale by about 15 pounds to save money on feed and ultimately send less meat to market. When pigs are close to maturation, they can eat up to 90 cents’ worth of food per day, Boerboom said, cutting into profits.

For now, they’ve also shelved some expansion ideas.

Others watching

Pork represents the most direct hit to Minnesota meat producers due to trade disputes so far, but others in the state’s ag industry have been hit, too.

Trade disputes have also affected prices for corn and soybeans, Minnesota’s two biggest agricultural exports, and tariffs on dairy from China and Mexico are now in effect, too.

Minnesota agricultural exports by commodity, 2016
Source: U.S. Department of Agriculture, compiled by Minnesota Department of Agriculture

Other Minnesota agricultural sectors haven’t been hit hard, but are closely watching federal trade policy.

Turkey, another big Minnesota industry, hasn’t been hit with any new tariffs. U.S. poultry has been banned from China since the 2015 avian flu outbreak, so China is less of a concern for that industry at the moment.

Turkey producers are, however, paying attention to North American Free Trade Agreement negotiations in the hopes that Mexico continues to be a major destination for Minnesota turkey. Of the 90 percent of Minnesota turkey sold out-of-state, about 15 percent goes abroad — much of it to Mexico — according to the Minnesota Turkey Growers Association.

“Our turkey farmers are watching the trade news closely and we have been in contact with our leaders in Washington, D.C. to make sure they understand how important trade is to us,” the Minnesota Turkey Growers Association said in a statement to MinnPost.

Despite new tariffs from Canada and China, the Minnesota Beef Council says beef has not seen the same effects soybeans and pork have.

Long-term

Last month, the Trump administration announced $12 billion in agriculture aid aimed at stabilizing some of the industries affected by foreign tariffs, such as soybean, corn and pork farmers. But Boerboom is concerned the bailout won’t really help pig farmers.

“They’ve announced the big agriculture package, but pork production has never had any government subsidies or government floor,” he said. “Corn, soybeans, milk — they’ve had some government program … they have no idea where the pork producers are because we’ve never had a program.”

These types of tariffs are painful for farmers, but, says Marin Bozic, a professor in the applied economics department at the University of Minnesota, the long-term concern is that the U.S.’s trade competitors are loosening trade restrictions, while the U.S. tightens them.

“Our competitors are signing free trade agreements left and right: New Zealand, Australia, the European Union. All of them have in the past few years entered into new kinds of multilateral as well as bilateral trade agreements with our major markets,” Bozic said. “That may not be the story of the day, because tariff retaliations and trade wars (steal) the limelight, but longer-term, without comprehensive market access that matches or exceeds what our competitors enjoy, we will struggle.”

Comments (3)

  1. Submitted by Jim Bernstein on 08/02/2018 - 12:59 pm.

    But They Love Donald Trump

    According to Mr. Trump, farmers are telling him “go ahead with your tariffs, we can take it”. When will pork producers start pointing their finger at Mr. Trump, decline their share of the $12 billion subsidy and refuse to support his Republican enablers in Washington and St. Paul?

  2. Submitted by richard owens on 08/10/2018 - 10:49 am.

    Commodity markets

    Trump insultingly said “I’ve opened Europe’s markets for you.”

    Of course that is just another lie.

    But underneath it is a presumption that our farm produce markets were somehow built by government deals. THEY WERE NOT.

    Our markets for Minnesota grown have been painstakingly built through years of carefully made supply chains, buyers’ and growers’ mutual trust, quality products reliably delivered and friendships and relationships lasting through generations.

    The cost of destroying those is huge, and they can’t be re-built in time to save so many people whose lives were hinging on those markets.

    Minnesota has received nothing in exchange for their support of Republicans, and once elected you cannot get them to find a long term funding mechanism for our transportation systems.

    Like markets, transportation projects require long term views and planning for priority and sequence.

    All they can do is offer you some more tax money back so they can cripple basic state services.

    Refuse to fix MNLars? Yep. Republicans use state problems as weapons.

    Farmers! Rural residents! Send Rs home in November.

  3. Submitted by Kathleen Castrovinci on 08/18/2018 - 05:58 pm.

    Trump does not care about anyone but himself.

    Just like with the Border Wall Trump conned voters that Mexico would pay for, he is conning farmers big time to pay for their own bailout with the Trade War HE started.

    When are voters going to realize that they are being CONNED by the reality TV con man?

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