(Bloomberg) -- Mexico's plan for retaliatory tariffs on U.S. products including some pork cuts is rattling the meat markets.
Shares of meat producers tumbled Thursday after Mexico's announcement, and hog futures slumped. About 22 percent of U.S. pork is exported, and Mexico is the largest buyer by volume. The country has been a key importer of hams at a time of record U.S. production, and has helped support the value of hogs.
The pork duties are in response to steel and aluminum tariffs the Trump administration is levying on imports from the European Union, Canada and Mexico. The plans follow similar measures by China, which has been in an ongoing trade tit-for-tat with the U.S. this year. The export threats add to the woes facing American farmers who are already grappling with a meat glut.
U.S. Pork Producers Lose $2.2b Due to China Tensions: Council
“It's a tragedy if we lose any major portion of our export business,” Christopher Hurt, a professor of agricultural economics at Purdue University in West Lafayette, Indiana, said in a telephone interview. “It comes at a bad time.”
Hurt is forecasting average losses for U.S. hog farmers of about $9 per animal in 2018 and $13 next year. Those estimates don't include any impact from tariffs by China or Mexico, and the trade disputes may not necessarily cause exports to drop, he said. If they do decline for any reason, the losses for ranchers could be even larger. If the portion of U.S. output that's exported was to fall to 18 percent from 22 percent currently, the losses in 2019 may widen to $18 a hog, Hurt estimates.
“It is especially frustrating to see U.S. pork caught up in a dispute that has nothing whatsoever to do with pork trade,” Dan Halstrom, the chief executive officer of the U.S. Meat Export Federation, said in an emailed statement. “If these tariffs are implemented, they will negatively impact millions of consumers and thousands of people in the meat and livestock industries on both sides of the border.”
Shares of pork processor Tyson Food Inc. fell as much as 4.5 percent in New York on Thursday, while Hormel Foods Corp. declined as much as 3.7 percent. Hog futures traded in Chicago dropped as much as 3.5 percent.
“The market is not taking this news very well,” Rich Nelson, chief strategist at Allendale Inc., said in a telephone interview. “This is certainly a negative.”
To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net
To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Millie Munshi, Steve Stroth
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