Floating Hogs Overlooked in China With U.S. Pork Exports to Gain

A recovery in pork prices after a safety scare in China, the world’s biggest meat consumer, may help revive flagging imports and boost profits for producers in the U.S., a trade group said.

“Imports should rise in the third and fourth quarters after a lousy second quarter,” Joel Haggard, the U.S. Meat Export Federation’s vice president for the Asia Pacific region, said in a phone interview today from Hong Kong. Full-year imports may still drop from last year, he said.

Prices of wholesale pork plunged 17 percent from Feb. 15 to May 10, with the decline accelerating on the discovery of more than 9,000 dead pigs floating in Shanghai’s Huangpu river in March. Prices are rebounding after the government began a second round of stockpiling this year and demand recovers. A gain in U.S. shipments to China, the third-biggest market for exporters such as Tyson Foods Inc. and Smithfield Foods Inc., may boost hog prices in Chicago, which have gained 7.3 percent this year.

“There’s usually turnaround time around May when China begins to prepare for traditional holidays,” said Haggard, who has led the trade group’s Greater China marketing for more than 20 years. Imports of pork in third quarter may climb about 9 percent from the second quarter to 120,000 metric tons, he said, citing the association’s preliminary estimate. The U.S. is the world’s biggest pork shipper.

The wholesale price of live hogs rose 0.2 percent to 13.29 yuan ($2.17) per kilogram in the week ended May 12, the Ministry of Commerce said. Live hogs may gain as much as 13 percent to 15 yuan per kilogram by the end of 2013, Zhang Taixi, president of Henan Shuanghui Investment & Development Co., the nation’s biggest meat processor, said last week.

Hog Futures

Pork prices in China fell to the lowest level since February 2011 on May 17. Hog futures for delivery in July rose 0.3 percent to 92 cents a pound on the Chicago Mercantile Exchange at 12:38 a.m. in Beijing.

Still, total imports in 2013 may decline from last year, Haggard said. Shipments of pork, which has higher commercial value, may drop about 10 percent to between 480,000 tons and 500,000 tons, while offal products may fall as much as 3 percent to 810,000 tons, he said.

U.S. products imported to China have been sold at wholesale levels, not visible to most consumers, Haggard said. As Chinese consumers become more concerned about of safety of domestic pork, there will probably be more demand for foreign meat, so the group is re-introducing U.S. pork in retail outlets, he said.

Imports faced risks in February when China’s quality watchdog, the General Administration of Quality Supervision, Inspection and Quarantine told U.S. agencies in Beijing that exporters had to provide additional documents to certify the pork is free from the chemical ractopamine, used as a feed additive by some U.S. farmers to make their pigs leaner.

After negotiations with China on clarification of the report’s format, most exporters now have been able to meet the requirement, Haggard said. “We haven’t heard a lot of products turned away,” he said.

Before it's here, it's on the Bloomberg Terminal.