January 23 – Feed Demand is Looking Tasty Due to Global Pork Markets

As the global demand for pork increases, so does the demand for feed. Corn and hog producers stand to benefit as the demand keeps climbing.

Some goods news for corn on a day where prices are in reverse.

Pork exports around the globe are starting to look up.

And it’s not just China that is going to make demand swell.

The January WASDE report indicated that feed use of corn would come in at 650 million metric tonnes. Even though that figure was about 2 million tonnes off from December’s expectation, the figure is about 20 million tonnes more than last year and 50 million tonnes more than 2015/16’s corn-for-feed use.

Domestically-speaking, the Janaury WASDE said that 5.55 billion bushels of corn will go into the feed and residual category in 2017/18 across America. While that’s technically down 25 million bushels from the December WASDE, it’s 83 million bushels more than 2016/17 but a whopping 436 million bushels more than what was used in 2015/16. 

That feed number is being driven in part by the significant boom in demand for pork around the globe.

And we talk about China a lot.

It’s vertical integration of pork production is creating significant demand for animal feed.

But let’s take a minute to look where else consumption is on the rise.

Professor Dermot Hayes at Iowa State says that “we’re only tapping the potential of Central America.” In addition to the developed market of Mexico, Hayes sees increased potential in both Peru and Columbia.

He also notes that Vietnam is a nation that has serious potential to become an important U.S. customer of pork exports. He notes that Vietnam is a decade behind China on economic development, and says that the nation’s pro-trade policies will make it an attractive market.

Every report has key metrics and information that really tells us what we already expected. We know that dietary changes around the globe will be a boost for pork exports… and we know that corn demand (in addition to soymeal) will rise.

But there is always a sentence or two that offers education on another topic that will be critical to boosting this demand. Hayes says that the U.S. National Pork Board has done a remarkable job at marketing American products to these markets.

This is important.

As we’ve mentioned across many commodities in GrainCents, the U.S. Presidential administration is the nation’s greatest threat to trade given its increasing protectionist rhetoric.

Whether it’s corn with NAFTA or TPP with wheat, the U.S. can’t expect to grow its export markets with policies that erode free trade.

Pork demand is going to rise, and U.S. corn and hog producers stand to benefit.

But only if Washington gets out of the way.

 

Up and Coming Pork Export Markets

Dermot Hayes, Distinguished Professor at Iowa State University shared his views on U.S. exports in the January-February issue of Farm Journal’s PORK. He has followed, influenced and visited growing export markets during his 31 years at Iowa State University. In this final excerpt, he discusses expanding markets, and shares his most rewarding moments of working with the U.S. pork industry.

In terms of emerging markets, Hayes says “we’re only tapping the potential in Central America.

“That region will go through the same boom Mexico went through, and their production costs are higher than in Mexico [which means exports from the U.S. will be in demand]. They have the same developing country increase in pork consumption,” Hayes says.

“Peru and Columbia are big markets now, but they’re going to be much, much bigger. Columbia is in the process of switching from chicken to pork. Pork consumption went from 4 kg per person up to 10 kg!”

Hayes gives credit to the U.S. National Pork Board for creative thinking and implementation of a recent marketing effort.

“Instead of fighting over market share, they [NPB] developed a cooperative generic pork campaign that was highly effective,” Hayes says. “Consumers just see that pork is healthy, there are no food safety issues, and that it’s coming from modern units. Consumers don’t know if that pork is from a production unit in Columbia or in the U.S., and it doesn’t matter. It’s an example of two industries working together to grow consumption and the model worked.”

Vietnam is another country that has excellent potential for U.S. exports, Hayes says.

“Vietnam is about 10 years behind China economically, but their policies are not that far behind,” he adds. “They’re just as pro-market as the Chinese.”

He notes there are about 100 million undernourished people in Vietnam eating a lot of rice and wheat right now, but they’re ready to switch if they can get access to inexpensive protein.

“The economy is booming and they have pro-trade policies and that’s creating economic opportunity,” Hayes says. “The first thing you do when you get money is buy your kids some decent quality protein.”

When asked what has been the most satisfying part of being involved in the pork industry, Hayes is proud of the fact that the U.S. has succeeded from being a net importer to a huge, huge exporter.

“You see it in parts of Iowa where livestock production has expanded, like Eagle Grove or Clarion or Webster City,” he says. “Those towns had lost their industrial base and were in decline. You go to their main streets now and they have restaurants opening and businesses growing. Many of them would not have survived if it hadn’t been for expansion in livestock production.

“I’m a free-market economist, so to have made predictions about what would happen if we let the markets work and then to see that happen has been gratifying,” Hayes says. “One of the first research projects I did when I came to Iowa State was to evaluate whether it was cheaper to ship the meat or the feed grains, and the answer was resoundingly in favor of meat. Now that we have access, to see it happen exactly as any economist could have predicted has been gratifying.”

H/T: Farm Journal's Pork
About the Author
Garrett Baldwin

Garrett Baldwin is a content strategist and editor at FarmLead. He covers the global grain markets and public policy issues related to the agricultural industry. He is a graduate of the Medill School of Journalism at Northwestern University. He also holds a Master’s Degree in Economic Policy from The Johns Hopkins University, an MS in Agricultural Economics from Purdue University, and an MBA in Finance from Indiana University.