When asked about the potential for U.S. pork exports to China, Dermot Hayes, Distinguished Professor at Iowa State University, points out that the official statistics show a rapid decrease in the size of the inventory and sow numbers in China, but the market signals show production is stable.
“It’s really hard to get a sense for how they could be showing year over year declines in pork inventories, and yet, produce as much pork as they do,” he says.
“Cropland is getting extremely scarce, and the government does not want to go below a red line,” Hayes says. “If you want to develop an acre of land in Beijing, you have to create an acre somewhere else. That’s putting pressure on livestock facilities, because there’s an opportunity cost associated with the ground these facilities are on. One solution is to build multi-story hog barns, but the costs and disease pressure are tremendous.”
Hayes says some villages are putting farmers into high-rises so the government can knock-out the farmsteads and create new crop acres.
“The punchline for me on China is the country is perfectly comfortable importing 2 million to 3 million tons of pork per year,” Hayes says. “A lot of that is composed of variety meats that don’t depend on the hog cycle. We can always export our pigs’ feet to China, even if they have a surplus of loins. China imported more than 3 million tons of pork in 2016, and it is close to this amount in 2017.”
Editor’s Note: In the final excerpt of the interview with Dermot Hayes, he discusses other emerging markets, and the growth of exports in the U.S.