The U.S. pork industry exports to more than 40 countries benefiting American farmers, pork producers and pork processors.
Critics accuse our company and industry of diverting products to foreign countries at a time when we warned of the possibility of food shortages right here in our country. Further, they assert that price levels were manipulated to take advantage of the American people. These assertions are wrong.
Why Does Smithfield export product?
Pork is the most consumed protein in the world, and 95% of the world’s population lives outside of the U.S. In the normal course, the U.S. has an abundant surplus of meat and produces roughly 25-30% more pork than can be consumed within our shores. The U.S. is the second-largest exporter of pork, behind the combined countries of the European Union. The main destinations for U.S. pork are China, Mexico, Japan and South Korea.
We are just one of a number of U.S. pork processors who export a portion of their production to a diverse set of international markets. Smithfield is a multi-national company and in no way controlled or influenced by any government, nor do we allocate product to any specific country, including China. Smithfield fully supports and participates in the free market, as do all its competitors.
This is a win-win for our nation’s farmers who are dependent on healthy export markets and robust trade with other countries. Exports benefit American farmers, create jobs and reduce the U.S. global trade deficit.
Ask any American farmer or farm industry association whether exports are important to a healthy farm economy. American farmers are dependent on robust export markets to sell the over-abundance of food we generate under normal circumstances.
The Truth About Exports Amid COVID-19
What no one anticipated, and has never happened in our lifetimes, is the scenario we are living through today.
That is, our harvest facilities, which are the critical linchpin in the supply chain, could be threatened, en masse, by a global pandemic that threatens our ability to produce food. As long as our nation’s harvest facilities continue to operate, not only do we have enough meat to feed Americans, but also to feed the world.
Without them, there is no food, either for the domestic or export markets.
Exports have indeed increased significantly year over year. But, there are a multitude of reasons why exports occur or, in this case, continued during this period, including:
U.S.-China Phase One Trade Deal
The U.S. has been locked in a bitter trade war with China for the last three years. Punitive tariffs were put in place by both governments during the course of the dispute. Those tariffs severely restricted the flow of trade for the previous two years. In January 2020, the Administration announced a Phase One agreement, the centerpiece of which was a commitment on China’s part to purchase significantly more agricultural goods. That commitment was widely hailed as a victory for U.S. farmers. So, comparisons to 2019 must be viewed through the lens of the changed circumstances year over year.
Without an understanding of agricultural markets, a few media outlets have concluded something nefarious is afoot. Clearly, these circumstances have had a material impact on the raw data.
Incidentally, Smithfield, together with the entire agricultural sector, fully supported the goals of the trade agreement, which is for a fairer balance of trade and the elimination of punitive tariffs that harm American competitiveness.
The Pork Industry Exports Items of Little Interest to Americans
A good portion of what is exported are items of little interest to domestic consumers. These include the byproducts from the pork production process like pig tongues, hearts, livers, kidneys, stomachs, snouts, ears and tails, and underutilized muscle cuts like large unprocessed hams, which find homes in export markets like China and Mexico because of low or seasonal demand in the U.S. The various primal cuts do not have equal demand in the U.S. Bellies, for example, have historically been in high demand in the U.S. because Americans love bacon. Unprocessed hams, not so much.
When you harvest an animal, you harvest the entire animal. Consequently, every pig harvested for U.S. consumption also generates export products. There will always be exports even in a time of shortage in the U.S.
For the most part, the U.S. does not export packaged meats products like bacon, ham and sausage and no packaged meats products at all are shipped to China from the U.S.
Many Industry Production Facilities Have Lines Designed for Exports
American farmers are reliant on robust export markets. Consequently, production facilities are designed and configured to produce products to export specifications. Again, 25-30% of production is exported under normal circumstances. Converting export lines back to domestic retail lines takes time. This often entails specific production equipment, staffing, training, packaging equipment and stock, labeling, etc. Similarly, the industry has certain facilities or production lines within facilities that are designed for foodservice customers. These lines specialize in products designed for restaurant use. It is how plants are designed and operated.
Because these lines, and indeed some entire plants, are specifically designed for a particular trade channel (retail, foodservice or export), production cannot be turned on and off like a light switch, to use Dr. Fauci’s expression. The industry cannot simply produce export product one day and domestic product the next. Similarly, foodservice lines cannot produce foodservice products one day and convert to retail lines the next day. It does not work that way. We wish it did. It does not.
For example, retail grocery supply chains are no more equipped to handle a thirty-pound box of foodservice bacon than the American consumer is prepared to purchase in that quantity. More importantly, the manufacturing specifications and packaging are completely different for retail and foodservice products. In the same way, export production lines set up to ship three-piece frozen carcasses to foreign destinations cannot immediately convert to domestic production because conversion requires engineering new production flows, installation of new cutting equipment, hiring and training additional staff, etc. The time to convert lines is typically measured in months under the best of circumstances, never mind during a global pandemic.
Modern retail grocery chains are not equipped to accept carcasses in their supply chain. They have no way of cutting and packaging the meat for sale. Bear in mind, the livestock keeps coming no matter what disruptions may occur in the various channels.
Industry players have begun modifications to convert lines to domestic production. Indeed, we announced back in early May our intention to retrofit lines in a major plant from carcass export to domestic production. We have spent over $20 million first installing and now converting it back to domestic production.
Channel Disruption/Demand Shocks
Demand shocks from the sudden closure of virtually every restaurant across the country meant supplies normally sold in foodservice channels may have been redirected to export markets. The meat business is a “sell it or smell it” business.
For just some of these reasons, it is not surprising that export volumes remained high amidst COVID-19. The bottom line is surplus and byproducts are sold in export markets, not the other way around.
We would never manipulate something as important to our country as the food supply and give preference to foreign customers. We are 42,000 strong. The idea that we would seek to feed another nation before our own is deeply offensive. Our warnings of impending meat shortages did not cause retailers to limit purchases; surging demand, empty meat cases and unfilled orders did that, something we are struggling with even today.
Last Updated August 23, 2020