US Pork Exports

Becca Hendricks AVP International Marketing,

National Pork Board

Exports Share of Production

• 23.4% of U.S. Pork (muscle cuts only)

• 27% of U.S. Pork and Pork Variety Meats

Source: USDA *includes sausage casings

CI #2: Enhanced DemandCI #2: Enhanced Demand

0

150,000

450,000

750,000

1,050,000

1,350,000

1,650,000

1,950,000

2,250,000Metric Tons

Canada FTA

NAFTA

(Mexico)

WTO Uruguay Round(Japan & South Korea)

U.S. -Taiwan Pork Deal

China

WTO Accession

Russia Pork

TRQs

Australia

FTA

DR -CAFTA

U.S. - Korea

U.S. -Colombia

U.S. - Panama

Importance of Free Trade

2012 Year-end Pork Exports – A New Record

• $6.3 Billion

– ↑3.5%

• 4.987 Billion lbs

– Up slightly

Source: USDA statistics compiled by USMEF

1st Quarter 2013 Exports

• $1.488 Billion

– ↓11% from Q1 2012

• 1.164 Billion pounds

– ↓12% from Q1 2012

• $55/head in value

Source: USDA statistics compiled by USMEF 2013

Partners in International Trade

• National Pork Board

• National Pork Producers Council

• US Meat Export Federation

• State Pork Associations

Serving Trade Partners

• Consistent, high-quality, nutrient-dense meats

• Unparalleled food safety history

• Reliable, versatile supply

• Market development & education support

• Transparent, responsible production methods

• Producer/packer/government commitment & collaboration

Trade Access

Laurie Hueneke Director of International Trade Policy,

National Pork Producers Council

US Pork Industry Trade Policy

• National Pork Producers Council = advocacy arm of the US pork industry which sets domestic and international policy

• Use science-based trade & impact to producers bottom line/economics to guide policy setting decision-making

– Work with subject-matter experts, other industry groups

• Many countries erect artificial or unscientific barriers to trade called non-tariff trade barriers or ‘sanitary and phytosanitary’ (SPS) barriers

– Examples: PRRS restrictions, trichinae mitigation

– Violates rules agreed upon as part of the global trade agreement

• Asia-Pacific region free trade agreement (FTA) negotiation

• 11 countries—Australia, Brunei, Canada, Chile, Mexico, New Zealand, Peru, Singapore, USA, Vietnam

• Japan’s (almost official) joining TPP is a game changer

• Most important FTA the US has ever negotiated thus far

• Goal: Removal of all tariff and non-tariff barriers

• Major payout is resolving sanitary and phytosanitary (SPS) barriers

• Aim to reach an agreement by fall 2013, but that will be difficult as many issues still remain outstanding

Trans-Pacific Partnership (TPP)

Transatlantic Trade & Investment Partnership (TTIP)

• Free trade negotiations between the US & 27-member European Union

• Negotiations likely to start summer 2013

• NPPC leading lobbying effort

• Major barriers to US pork exports

– Tariff rate quota (TRQ) smaller than Uruguay Round minimum access

– Ban on ractopamine

– Trichinae mitigation requirements

– Prohibition on pathogen reduction treatments (PRTs)

– Plant approvals

• Russia• Implemented complete ban on imports of US pork, beef and turkey Feb. 11

• No science-based reason

• In December, Russia announced it would require pork imports from the US to show documentation that the pork does not contain ractopamine residues (Paylean)

• NPPC working w/ US government to reopen market for ractopamine-free product

• China• Issued a statement asking for third party verification that US pork exports

contain no ractopamine residues

• Already had ban on ractopamine

• Lots of volatility and uncertainty

Russia & China

TrichinaeCountries with Trichinae Restrictions:

• Albania • Argentina (unofficial)• Barbados • Belarus • Brazil (unofficial)• Chile • Croatia • Colombia (lifted soon)• Dominica• European Union

• India• Kazakhstan• Macedonia • Peru• Russia• Serbia (no export

certificate)• Singapore• South Africa• Ukraine• Venezuela

Impact of Trichinae Restrictions on US Pork Exports

Dermot Hayes Iowa State

University, Trade Consultant to NPB and NPPC

Overview

• Costs associated with trichinae certification for both chilled and frozen pork

• Chilled and frozen pork markets, shelf life issues and consumer preferences

• How chilled and frozen pork is processed and sold

• Economic costs of certification

• Country specific data

Certifying Frozen Pork

• Example: A customer asks to buy frozen picnics that

are trichinae certified

• The USDA will provide cert if it can make sure that

time/temp conditions met, this requires monitoring

• A third party will handle freezing and paperwork for

$0.06-0.10 per pound

• A special label is then used to identify the boxes that

contain the certified picnics

• This is added to the capital costs associated with the

ownership of the meat

Testing Fresh or Chilled Pork• Example: A customer asks for chilled picnics with trichinae cert

• Plant identifies a group of animals for testing so guaranteed enough picnics

• The animals are slaughtered and processed separately from other animals

• Sample taken from diaphragm of each of the animals and sent for testing

• The lab combines a group of 100 samples and searches for trichinae larvae, if the sample is free then the carcasses are certified

• Lab cost is $0.01 per pound of carcass. Paperwork and segregation costs equal $0.02 to $0.04 per pound depending on the facility, (larger facilities have higher costs), industry average is $0.044 per pound

• Picnics sent to the customer and the rest of carcass sold to customers that do not require a cert

Markets for Chilled and Frozen Pork

• In general, importing retail consumers prefer chilled pork and processors prefer frozen pork

• Because of limited shelf life, chilled pork can only be sold to countries where shipping time and customs clearance make it feasible

• Countries that currently import chilled US pork include Japan, Mexico, Canada, Taiwan and South Korea

• In theory, US can export chilled pork to the EU, Russia, China and all of Central and South America

Markets Where Frozen Requirement is the Barrier

• Kazakhstan, Singapore, South Africa, Ukraine

• EU and Canada can provide pork to these markets without additional $0.10 per pound cost

• Importers prefer spot purchases from these sources rather than the paperwork and capital costs and time associated with the US system, this further erodes the US costs advantage

Singapore

Partner Country UnitQuantity % Share % Change

2012/20112010 2011 2012 2010 2011 2012

World T 72,361 65,994 72,055 100.00 100.00 100.00 9.18

Brazil T 26,962 22,565 26,993 37.26 34.19 37.46 19.63

Netherlands T 8,088 8,991 10,932 11.18 13.62 15.17 21.60

Australia T 12,898 11,298 9,147 17.82 17.12 12.69 - 19.04

United States T 8,055 7,461 7,378 11.13 11.31 10.24 - 1.11

France T 3,555 3,771 3,080 4.91 5.71 4.27 - 18.33

Denmark T 2,222 2,091 2,522 3.07 3.17 3.50 20.59

Spain T 396 1,294 2,466 0.55 1.96 3.42 90.65

Canada T 4,551 2,043 2,281 6.29 3.10 3.17 11.65

Germany T 1,199 1,132 1,942 1.66 1.71 2.69 71.57

South Africa

Partner Country UnitQuantity % Share % Change

2012/20112010 2011 2012 2010 2011 2012

World T 26,105 32,079 32,951 100.00 100.00 100.00 2.72

Germany T 11,083 15,896 13,304 42.45 49.55 40.38 - 16.30

Canada T 5,816 7,831 8,135 22.28 24.41 24.69 3.89

Spain T 1,985 2,677 4,760 7.60 8.35 14.44 77.79

France T 3,013 2,192 1,999 11.54 6.83 6.07 - 8.82

United Kingdom T 50 23 1,268 0.19 0.07 3.85 5413.05

Denmark T 889 278 976 3.41 0.87 2.96 251.77

Belgium T 1,423 1,037 803 5.45 3.23 2.44 - 22.54

Ireland T 1,541 1,063 797 5.90 3.31 2.42 - 24.96

Netherlands T 0 75 312 0.00 0.23 0.95 316.62

Hungary T 99 760 300 0.38 2.37 0.91 - 60.56

United States T 25 80 244 0.10 0.25 0.74 204.58

Markets Where Chilled Requirement is the Barrier

• Argentina (unofficial), Brazil (unofficial), Chile, Cuba, Colombia (may soon be removed), Dominica, EU, Peru, Russia

• Suppose that picnics account for one tenth of the carcass value then the effective barrier is $0.044 per pound multiplied by 10!

• Need to request the certificate before the animal is slaughtered also imposes a cost because spot sales are prohibited (the largest US pork exporter to Mexico does not slaughter any animals), elimination of spot sales is worth about $0.10 per pound

• Total cost of this system effectively keeps us out of the chilled market in the countries listed above

• US has a competitive advantage in many of these countries as is evidenced by market share in frozen product

Colombia

Partner Country Unit

Quantity % Share% Change

2012/20112010 2011 2012 2010 2011 2012

World T 8,082 16,354 26,818 100.00 100.00 100.00 63.98

United States T 3,211 7,779 13,611 39.73 47.56 50.75 74.98

Chile T 2,250 3,879 6,765 27.83 23.72 25.22 74.41

Canada T 2,622 4,697 6,417 32.44 28.72 23.93 36.62

China T 0 0 25 0.00 0.00 0.09 0.00

Summary

• Trichinae certification reduces our market share for frozen pork in all countries

• Trichinae testing reduces market share or eliminates US from competition in potential chilled pork markets

• This report puts a value on this problem

• Solutions:

– Elimination of the import requirement based on USDA designation and scientific evidence

– Bring US pork industry practices and regulatory infrastructure in line with OIE standards

Global Outreach-Trichinae

• USDA, NPPC and NPB developed position statement which was used to provide the US/global position

• Outreach conducted to Central and South American country pork producer groups, reached out to their veterinary authorities

• Results of OIE Code Commission:

– Text for combination of audits and surveillance but neither separately

– Consistent with an EU perspective

• Adopted in May but agreed to remain amendable

• OIE agreed to continue to work on a system for national trichinae negligible risk status

Next Steps

• Harmonizing OIE standards and US commercial industry's status will maintain trichinae standing

• Pork organizations will continue to interact with OIE standard setting on behalf of US pork producers

– More work to be done to gain negligible risk status

– Open new opportunities for chilled U.S. pork

– Full benefits won’t be realized for years…laying groundwork

Your Role to Ensure Continued Safe Food, Animal Health and Market Access

• Trichinae prevention SOPs will also protect herd health!

– Work with your veterinarian

– Participate in PQA Plus and implement GPPs

– Strict biosecurity

– Strict rodent control

Questions?