Indiana Corn Marketing Council (ICMC) and Indiana Soybean Alliance (ISA) farmer-leaders often point out it’s not just direct sales of those two crops that “move the pile” – it’s also derived products such as oil and biofuel and value-added goods like meat, eggs, milk and other livestock and poultry products.
After all, a steak, chop or drumstick also carries the value of its animal’s feed.
“We’re shipping corn and soybeans when we’re doing that,” pointed out Mark Legan, a Coatesville, Ind., farmer who also serves on the ISA board as well as the U.S. Meat Export Federation’s (USMEF) Executive Committee.
Ed Ebert, Senior Director of Grain Production and Utilization for ISA ICMC, said finding new export markets is a primary function of the state’s corn and soybean checkoffs. He added that Hoosier soybean and corn growers benefit from the many offices that organizations such as the USMEF and the USA Poultry and Egg Export Council (USAPEEC) have all over the world, which allows those organizations to establish key relationships with foreign buyers of Indiana farm produce.
In its August Outlook for U.S. Agricultural Trade, the USDA’s Economic Research Service (ERS) and Foreign Agricultural Service (FAS) projected fiscal year 2021 ag exports – Oct. 1, 2020, to Sept. 30, 2021 – at $173.5 billion. Livestock, poultry and dairy are projected to comprise $36.4 billion of this, or 21 percent, up from $31.6 billion in FY 2020.
Just since May, the ERS/FAS raised its projection by $2.2 billion on increased exports of beef to China, Mexico and South Korea; poultry into several major markets; and dairy because of increased skimmed milk powder and whey to China.
For FY 2022, the Outlook is projecting livestock, poultry and dairy exports at $36.8 billion, primarily on increased dairy and poultry sales – specifically, more milk powder and cheese to Asia and Mexico, and chicken paws to China to fulfill “robust” demand for the delicacy.
In fact, USAPEEC reported in January-June 2021 that almost 60 percent of the 217,020 tons of poultry exported to China were paws, which fetch U.S. producers far more income than they would get selling to domestic renderers. “It’s a joke (among farmers) that we need to raise threelegged chickens,” observed Mike Beard, an ICMC board director and farmer from Frankfort, Ind.
The USAPEEC noted total chicken broiler exports reached a record high for the same 2021 period, especially to Mexico, China, Cuba and Philippines – these markets accounted for more than 49 percent of broiler exports in those months. Total broiler export tonnage was up 6.8 percent over the same period in 2020, but the value of that was 21 percent over 2020, to $2.14 billion.
U.S. egg exports were up in the first six months of this calendar year by 18 percent, to 170 million dozen, reflecting a value gain over FY 2020 of 37 percent to $154.3 million. Legan noted that poultry is the No. 1 livestock consumer of soy meal.
And so it also goes with corn. “For us in the grain industry, they don’t eat a lot – but there’s a lot of birds eating,” said Beard, who also serves on the USAPEEC executive committee. Beard raises pigs, not poultry, but as a corn grower knows the value of hungry chickens, turkeys and ducks.
Sales and costs
In 2020, Legan said China increased its purchases of U.S. pork by 40 percent because of domestic pig losses to African swine fever (ASF) culling. In the first half of 2021, sales to China were down 10 percent from that, but overall U.S. pork exports were only down about 1 percent. He said this shows how well the USMEF has worked to diversify its target markets during the past several years so as not to rely too heavily on a few big buyers like China, Mexico and Japan “to the extent that we have in the past.”
USMEF has made inroads for selling to Central America, Colombia and Philippines and Southeast Asia. “Other regions of the world are stepping up (to buy),” he said, “And even Mexico’s come back online pretty strong after the steel tariff retaliation issue with pork the past couple years.”
The U.S. exports approximately 30 percent of the pork it raises – ERS/FAS projects FY 2021 sales will be $7.2 billion, almost $500 million more than 2020 exports, but down slightly to $7.1 billion for 2022.
U.S. beef exports are up year-over-year, and China began leading the way as a buyer in 2020. Legan said the governments of China and Australia – China’s biggest traditional beef supplier – have been embroiled in a trade dispute, so U.S. cattle producers have increased their Chinese sales. Globally, ERS/FAS project U.S. beef exports for FY 2021 will increase to $8.4 billion, from $6.64 billion last year, but drop slightly to $8.3 billion in FY 2022.
USMEF and analysis firm World Perspectives, Inc. calculated in 2020, beef and pork exports added value of $129 million alone to Indiana corn, as hogs and cattle consumed 36.7 million bushels. Pigs also ate 7.34 million bushels of state-produced soybeans, adding value there of $65.9 million.
Combined, beef and pork exports comprised 11.5 to 12 percent of each Indiana bushel’s value last year. And in the nine years of 2021-29, USMEF estimates beef and pork exports will contribute another $1.25 billion in market value to Indiana corn, and $815 million to the state’s soybean crop.
Michael Langemeier, a Purdue University agricultural economist and associate director of its Center for Commercial Agriculture, said the U.S. is blessed with strong domestic demand for meat and livestock products, which mostly helps curb prices from swinging wildly when exports fluctuate. Of course, 2020 was not normal, with the COVID-19 pandemic also driving people out of restaurants and hotels and changing not just the cuts of meat needed to sell, but also playing havoc with the supply chain itself.
“It’s been a pretty difficult year to try to project what’s going to happen with pork and beef,” he said.
This year, and even in late 2020, feed costs have been up sharply for livestock producers – on average, he said feed has been 25 percent higher for swine and cattle producers and about 26-27 percent for poultry. This followed six years of relatively tiny 2-3 percent changes from year to year, predicated on fairly flat corn and soybean prices.
For cattle finishing, he said if one sets aside the seasonal fluctuations built into feed costs, at the end of 2020 the average feeding cost of gain per cwt. was below $80. By July, when corn prices had risen, coupled with a shortage of forages from drought in parts of the country, Langemeier said the cost was $100 – a 25 percent increase. By comparison, seasonal changes in a normal year can vary by 5 percent.
Feeding cost of gain is really sensitive to corn prices – each 10-cent movement on the price of a bushel of corn translates to about 90 cents in feeding cost of gain for cattle and 45 cents for hogs. “A dime is not a very big change, but when you’re talking (at least) 45 cents’ change in cost per cwt., that’s a pretty big move,” he pointed out.
Soy meal is more critical to swine and poultry diets than for cattle. For every $10 change in a ton of meal, this is about 30 cents in feed cost per cwt.
China’s beef demand
Langemeier noted China has traditionally looked to other countries for beef. That said, Chinese diners could develop a taste for American beef, since it is a different, more corn-fed meat than they’re used to from Australia and Brazil.
USMEF reported in the first seven months of 2021, China imported more than 99,000 metric tons of U.S. beef, a value of $773 million. While this doesn’t approach the volume of long-faithful Japanese (184,836 tons) or Korean (165,669) importers, the significance is in percentage gain – Japanese imports were up 1 percent over the same period in 2020 and Korean, 17 percent.
But China’s purchases from a year earlier were up by more than 1,000 percent, making the U.S. the current primary supplier of grain-fed beef there, according to USMEF.
Through July, U.S. pork exports were steady with the same seven-month period in 2020, up about 1 percent to just under 1.8 million metric tons, with a value gain of 8 percent, to $4.98 billion. Exports to Mexico were up 22 percent over a year earlier, to 462,771 tons – with a whopping 50 percent gain in value to $936 million. This is 10 percent higher than the record year of 2017.
Pork sales to Japan were up 7 percent over January-July 2020, with a value increase of 6 percent to slightly more than $1 billion. Its imports of chilled pork were also up 6 percent over a year earlier. Central America has come on strong this year, posting a 47 percent gain in pork purchases over early 2020, at a value of $203.5 million; and U.S. marketers are still capitalizing on temporary tariff relief in Philippines, where they have tripled sales over January-July 2020 to $166.2 million.
China remains this year’s chief destination for U.S. pork, despite a 22 percent decrease from January-July 2020, to 525,058 tons; value dropped by the same factor, to $1.23 billion. Through July 2021, however, the sales of pork variety meats to China/Hong Kong were the fourth-highest on record, up 29 percent in value to $491 million.
“This is especially important, because China’s demand for pork variety meat remains strong, and it is critical that the U.S. industry capitalizes on this opportunity,” said USMEF President/CEO Dan Halstrom.
“Variety meat” are animal parts that don’t see much traction in the U.S., explained Maria Zieba, Assistant Vice President of International Affairs for the National Pork Producers Council (NPPC). She said about 65 percent of U.S. pork kidneys, livers, intestines, face and similar cuts/organs are sold to China.
Overall, the United States is the second-largest supplier of pork to China with about 16 percent of its market share, behind Spain.
Pork exports are up 8.5 percent to key markets in 2021, she said, “mainly a lot of those markets where we have trade agreements.” She did note while customers like Mexico, Korea and Colombia are rebounding from COVID-19 impacts last year, there are still many countries with shutdowns in place – meaning restaurants and hotels not selling food as they normally would.
Expanding access to U.S. meat
NPPC isn’t the marketing arm of U.S. pork; that’s the National Pork Board. Zieba said the NPPC lobbies for policies favorable to producers, including to help make connections for more sales into existing and emerging markets. It works with organizations such as the National Corn Growers Association (NCGA) and the American Soybean Association (ASA).
This year’s increased exports to Philippines is a good example of expanding access. “We worked really hard for the last 3-4 years on better market access into the Philippines, and earlier this year we were rewarded by that hard work because the Philippines unilaterally decreased their tariffs, and it’s been tremendously beneficial for our industry,” she said, adding the rise in pork sales are “on purpose.”
U.S. pork is working on expanding access and sales into Vietnam and Southeast Asia, Latin America, South Africa, Australia and Jamaica, to name a few. Each market is unique in the level of work needed.
For instance, Zieba said Philippines had big demand for pork, but tariffs slowed sales there. In Colombia, the U.S. has a free-trade agreement, but much work was needed to build taste for pork, which paid off a few years ago when Mexico imposed pork tariffs in retaliation for U.S. tariffs on steel. USMEF pointed to higher tariffs on U.S. pork into Vietnam than from other nations as another challenge being addressed.
And Beard said the ICMC is active in promoting poultry consumption in places like India, Colombia and Mexico, such as working with well-known chefs to show variety in how meat and eggs can be prepared. In Mexico, he said it has helped support a meat company processing turkey, in the hopes of making it more mainstream.
Both Zieba and Legan noted one issue that, if improved, could increase exports for ag producers and marketers: Shipping reform. There are multiple factors playing into this, but an immediate one is shortage of oceangoing shipping containers combined with skyrocketing freight rates over the past several months.
Zieba said many containers coming from China with consumer goods are unloaded and sent back empty because Chinese exporters are willing to pay a higher rental fee than owners gain waiting on U.S. exporters to fill them for the return trip. Legan noted, “Virtually all the pork we send to China is frozen product, and there’s been a lot of congestion on ports of the West Coast” that means if the pork is going to remain good, freezing is necessary.
He said the ISA has helped fund a pilot program to ship fresh chilled pork to China, which is locally desired over frozen meat – however, it’s difficult to get the product there and in timely fashion with the current shipping situation. “We’re trying to build demand for U.S. pork, and preferably Indiana pork, and to differentiate that from European pork or Canadian pork.”
In August, Rep. John Garamendi (D-Calif.) introduced a bill in the U.S. House – the Ocean Shipping Reform Act of 2021, H.R. 4996 – intended to establish reciprocal trade opportunities to help reduce the U.S. trade deficit with China and create fair-trade rules. It would, in part, provide authority to the Federal Maritime Commission to “establish rules prohibiting common carriers and marine terminal operators from adopting and applying unjust and unreasonable demurrage and detention rules and practices.”
So far it has bipartisan support from several states.
“We’ve developed these markets – but then if the U.S. can reliably get product shipped is going to be a big concern,” Legan pointed out.
