We are in the beginnings of a commodity super cycle, says Global AgriTrends CEO

It's a hopeful picture for U.S. agriculture in 2021, says Brett Stuart, CEO, Global AgriTrends, Preston, Idaho. He took time for a Q&A to look at pork export trends and much more.

SF: USDA data shows pork exports in 2020 shattered records. How did that happen?

BS: In 2020, our pork exports were up 15% in tonnage and 21% in value. That is staggering.

China has driven that market higher. We exported 6.5% of our entire production last year to China. A few years ago that was 1%. The impact is huge. It's not just the direct impact of China buying more pork; it's also opening up markets for us around the world.

SF: Will that growth continue?

BS: Chinese hog prices remain very high, suggesting that they are going to continue to be in the markets this year. I don't see a quick recovery from African swine fever. We continue to hear issues about diseases as they try to expand. We have a weakening U.S. dollar, which supports commodities and exports. That is in our favor.

The difficulty is the fact that China is so nontransparent. We are trying to decipher that demand and the impact it has on the U.S. and on our competitors.

SF: What impact did COVID have on the pork industry and exports last year?

BS: It clobbered us. Consumers were forced to buy meat in retails stores instead of restaurants, and the plants slowed down in March, April, and May. Those caused shortages, which caused soaring prices, which caused huge volatility in our prices and in exports.

It looks like we are past that now. As I look at the trade data, the COVID impact is over. As we look forward to a COVID-vaccinated U.S. and world, we can expect to see increased demand.

SF: What is your projection for 2021 pork exports?

BS: I have 2021 pork exports forecasted to be down 2%. That may sound a little disappointing or underwhelming, but you have to realize we just went up 15% in a year. If we can hold 13% of that gain, this would be a great victory. I think we can.

I have China/Hong Kong dialed back about 16% this year. The main reason is that last spring we had a huge surge in demand by China/Hong Kong just for three months. If I ignore that going forward and say we are going to be steady with a year ago, that is where my forecast is.

Those Chinese prices suggest the market is oversupplied. I know they are expanding, but they have a big hole to dig out of after African swine fever. I feel pretty good that we might lose 2% off of this 15% gain in 2020.

SF: Can we trust what we hear out of China?

BS: It's a huge challenge to assess what is really going on. The Chinese government is trying to commercialize 20 million sows. Think about what that takes. They need managers, swine vets, feed mills, nutritionists – it's overwhelming. The real challenge is management. You can build massive sow operations, but who do you hire to manage them?

China is a disease-dense country. I have heard a lot about ASF in the last six months out of China, as well as pseudorabies, PRRS, and PED. It's a constant battle with disease.

The Chinese government tells us they are on the road to recovery. In December, they said they are 90% recovered and by the second quarter they would be 100% recovered. I don't buy that for a second. I don't think they are even remotely close. In fact, recent contact with individuals in China suggest the pig losses are building. The losses are bigger than the expansion in recent months. I think their road to recovery is very bumpy and I don't know if they will ever recover to where they were.

They are feeding $12 corn in China. We have a very good value proposition compared with that. To import so much, China has ramped up its infrastructure, cold storage facilities, and distribution. I don't see that going away. There are a lot of issues before China can truly say they are recovered from ASF.

SF: Is the U.S. packing industry fully recovered?

BS: We are not recovered. We've been able to get all the hogs processed, but our real challenge now is having the labor to do the value-added work. Boneless hams are worth a lot more than boned-in hams, but when you don't have enough employees to get all the hogs processed, you don't worry about boning hams, you process the hogs. We don't have the labor to pull all the offal we could export to China. While we have caught up with the hog supply, we are still understaffing in terms of our value-added products, which is a real frustration in our current hog market.

SF: Outside of China, what other countries are you looking at for export growth?

BS: I have forecasted growth for Mexico, Japan, and Korea this year. We are tariff-free now on pork into Korea, which is a big advantage. Where we really succeed is where we are duty-free. We are approaching a point where we are going to be duty-free in Latin America, south of Mexico. They are small markets, but when you add them all together, they are important.

SF: What else can farmers expect in 2021?

BS: We are in the beginnings of a commodity super cycle. Corn and soybean prices are going through the roof. We have incredible Chinese demand for corn right now. China is driving global markets for beef, pork, poultry, corn, and soybeans. We are going to have a year where all our major commodity markets are being driven by a country with very limited data. That will drive some uncertainty into the markets. But with this weakening dollar and the COVID recovery, we are going to see a boost broadly to the global commodity markets.

Of course, higher pork prices aren't as great when you have higher corn and soybeans prices, but it sure feels like the tailwinds are blowing into the U.S. pork market in 2021.