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BRINGING HOME THE BACON: U.S. PORK TRADE

pork

BRINGING HOME THE BACON: U.S. PORK TRADE

The Year That Wasn’t

This year was supposed to mark a comeback for U.S. pork producers. Instead, the industry faces volatile markets and unprecedented supply chain disruptions. COVID-19’s domino effect on farmers, processors, retailers and consumers underscores the complexities of our modern food system.

In late April, meat industry executives warned the United States could soon face a meat shortage after processing facilities closed temporarily due to the spread of COVID-19 among employees. Total meat supplies in cold storage facilities across the United States totaled roughly two weeks’ worth of production. With processing at a standstill, meat supplies for retail grocery stores were expected to shrink by nearly 30 percent by Memorial Day, leading to increases in pork and beef price prices of as much as 20 percent, according to analysis by CoBank.

Shuttered plants also meant that farmers had nowhere to send their mature pigs, creating a massive livestock backlog. While many meat processors have re-opened as of May 2020, hog farmers may yet be forced to euthanize as many as seven million pigs in the second quarter of 2020, a loss valued at nearly $700 million. The Food and Agricultural Policy Research Institute forecasted a total loss of $2.2 billion for the U.S. pork industry in 2020 due to the pandemic.

US 3rd largest pork producer

Going Whole Hog on Exports

According to the United States Department of Agriculture, the United States is the world’s third-largest producer and consumer of pork, shipping on average more than 5 billion pounds of fresh and frozen pork internationally each year since 2010.

But this dominant role in world pork trade is a fairly recent phenomenon. The United States became a net exporter of pork in 1995. Exports jumped from two percent of total production in 1990 to 21 percent in 2016. What made this spike possible?

The U.S. pork industry has gone through a major restructuring since the mid-1980s, shifting from small, independently owned operations to larger, vertically-integrated companies that contract with growers to raise pigs. This structure increased the industry’s productivity and year-round slaughter capacity. Between 1991 and 2009, the number of hog farms in the United States dropped by 70 percent but the number of hogs remained stable.

The National Pork Producers Council calculates that exports account for nearly 36 percent of the total $149 average value of a hog. While American pork is shipped to more than 100 countries, just four countries account for 75 percent of U.S. pork exports: Mexico, Japan, China, and Canada. It’s easy to see why implementation of the U.S.-Mexico-Canada Agreement is important to U.S. pork producers: Mexico alone accounts for about one-third of all exports by volume. U.S. exports of pork increased 1,550 percent in value since 1989, when the United States first implemented a free trade agreement with Canada.

U.S. pork producers mainly compete with pork producers in the European Union, Canada, and Brazil for sales in overseas markets. American farmers were concerned they could lose market share in Japan after the United States did not join the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP) and Japan made a trade deal with the European Union. Japan is the largest value market for U.S. pork and the second largest market by volume. However, pork exports there have been trending higher in 2020 following the U.S.-Japan Trade Agreement.

Where US pork exports go

Higher on the Hog in China?

For the last two years, American pork producers have found themselves in the crosshairs of a trade war between the United States and China, a key export market. In April 2018, China levied a 25 percent retaliatory tariff on many U.S. pork imports in response to Section 232 tariffs put in place by the United States. In 2019, China again retaliated against American pork, this time in response to Section 301 tariffs.

Before the trade war, China was the second-largest market for U.S. farm exports (after Canada). In 2016, China purchased nearly $20 billion in American farm products but sales dropped sharply in 2018 to $7.9 billion.

The “Phase One” U.S.-China trade agreement went into effect on February 14, 2020. It includes a commitment from China to import an additional $12.5 billion in U.S. agricultural products during 2020 on top of a 2017 baseline of about $24 billion. The agreement also provides access for a larger variety of U.S. pork products and restores access for processed pork products, which had been blocked by China.

As part of this deal, on February 17 China announced tariff exclusions for 696 products, including pork. In the first quarter of 2020, China bought $5.05 billion in U.S. farm goods, up 110 percent from last year. China’s pork imports almost tripled from March 2019, reflecting a major domestic supply gap caused by African Swine Fever (ASF).

However, concerns remain if it is feasible for China to meet the purchase targets set in the agreement. Through March 2020, U.S. Census Bureau data show that U.S. agricultural exports to China were only at 37 percent of year-to-date targets. The American Farm Bureau Federation found that U.S. agricultural exports to China need to accelerate by 114 percent each month from May through the rest of the fiscal year to meet the “Phase One” target.

China ag purchases fall in trade war

Not Exactly “Year of the Pig” for Pork Industry

The possibility of U.S. sales to China going unfulfilled seems surprising. Another virus – ASF – has been ravaging China’s pork output since August 2018. ASF is a highly contagious, deadly pig disease with no known treatment or vaccine. It does not affect humans or food safety but it has had a devastating impact on China’s pork industry, the world’s largest, leaving a shortage in domestic supply.

Despite low officially reported cases of ASF, as many as 350 million pigs died from the disease in China during 2019. (And because the disease continues to spread across borders, one quarter of all the world’s pigs may die from ASF.) After more than a year of declining pork output, China’s total pork supply gap is estimated at 18 million tons – a figure much larger than total global supplies. Chinese consumers have faced record high prices for pork, traditionally their protein of choice. Some parts of the country also faced meat shortages due to disrupted supply chains during the COVID-19 quarantine.

To address persistent high prices, the Chinese government auctioned off a small amount of frozen pork from publicly held pork reserves, but the move was largely symbolic and had a limited short-term impact on prices. The government’s total pork reserve volumes are a national secret and not publicly available.

Enter: Coronavirus

As American hog farmers were positioning to fill China’s need to import more pork, enter the coronavirus in early 2020, which threw the U.S. pork market into extreme volatility.

After COVID-19 forced processing plants to temporarily close, U.S. pig prices dropped 27 percent in about a week, reducing profits for pig producers while consumers paid more for pork at the grocery store. The demand for meat often takes a hit during economic recessions as consumers keep a close eye on their grocery bill. At the same time, the industry lost major food service markets such as restaurants, universities, and elementary schools that were also shut down.

To help pork producers and other farmers, USDA on April 17 announced the Coronavirus Food Assistance Program (CFAP) to provide $19 billion in emergency aid to farmers and ranchers hit by market disruptions. CFAP includes $16 billion in direct payments to producers and $3 billion in purchases of fresh produce, meat, and dairy products for distribution through food banks. USDA will purchase an estimated $100 million per month in pork and chicken, along with other food products, beginning in May. Nonetheless, an industry-funded analysis by Iowa State University found that American hog farmers will lose $5 billion (or $37 per pig) due to reduced prices for pork and shuttered processing plants.

US pork shipments to China

Saving Our Bacon

America’s pork industry has been beset with uncertainty in recent years. The latest Purdue University-CME Group Ag Economy Barometer found that the unknowns surrounding the pandemic have further decreased farmer optimism to a four-year low, with 67 percent of farmers saying they are worried about the impact of the coronavirus on their business.

Prior to COVID-19, U.S. farmers were already reeling from lost sales due to China’s tariffs. The saving grace for U.S. pork producers now is that pork exports are actually ramping up.

During March and April, the number of pigs slaughtered per day decreased by 40 percent, but shipments of U.S. pork to China more than quadrupled, including whole carcasses as well as products that Americans generally don’t eat, like feet and organs. The U.S. Meat Export Federation estimated that so far in 2020, about 31 percent of U.S. pork has been exported with one-third of that volume going to China.

That means that in the near term, increasing exports will remain vital for the U.S. pork industry to weather the coronavirus storm as processing capacity gets back online and domestic sales begin to rebound.

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Sarah Hubbart provides communications strategy, content creation, and social media management for TradeVistas. A native of rural Northern California, Sarah has melded communications and policy throughout her career in Washington, D.C., serving in government affairs, issues management, and coalition building roles in the agricultural sector. She is an alum of California State University, Chico and George Washington University.

This article originally appeared on TradeVistas.org. Republished with permission.
farm

A SHORTAGE OF FARM GUEST WORKERS COULD THREATEN AMERICA’S HARVEST

Harvest season is here

Right now, acres and acres of lettuce sit ready to be picked in California’s Salinas Valley – an area known as the Salad Bowl of the World. But who will harvest it?

The Golden State is an agricultural powerhouse, producing more than 400 commodities, including one-third of all U.S.-grown vegetables and two-thirds of our fruits and nuts. In 2019, California’s agriculture exports totaled $21.02 billion, ranking first among all states in the value of farm exports for the last twenty years. California’s almonds are a favorite of the European Union, its dairy products ship to Mexico, California pistachios travel to China, and the state’s high-quality rice is increasingly popular in Japan.

Spring means harvest season is here – or will be soon – for many crops in California and around the country, from asparagus to cucumbers to tomatoes and more. Thousands of workers are needed to pick these crops. And over the years, those workers have become harder and harder to find – a challenge that is being exacerbated by the COVID-19 pandemic.

Labor shortages cause farm losses

The American Farm Bureau Federation says that U.S. agriculture needs 1.5 to 2 million hired workers. These challenging, often seasonal, positions are essential to food production – but few U.S. citizens are willing to fill them. A California Farm Bureau Federation survey found that 56 percent of California farmers have been unable to find all the workers they need during the last five years.

While some farmers are shifting to labor-saving technologies, others can’t afford the expense of mechanization. And many of the high-value fruits and vegetables that California is known for must be harvested by hand to ensure their quality.

Given this chronic labor shortage, immigrants – most from Mexico – play an increasingly crucial role in our food system. Foreign-born workers can legally come to the United States to perform short-term farm labor under the H-2A Temporary Agricultural Worker Program, often referred to as the H-2A visa program.

56 percent cant find workers needed

Temporary labor through H-2A program

The Immigration Reform and Control Act of 1986 established the agriculture-focused H-2A program and a separate H-2B program for skilled workers in industries like healthcare and tech. The H-2A program is the primary way that U.S. farmers can legally hire immigrant labor from countries deemed eligible by the Department of Homeland Security (DHS). The process requires several steps and fees.

To participate, farmers must first receive a temporary labor certification for H-2A workers from the Department of Labor (DOL). This should be submitted 60 to 75 days before workers are needed. Then, farmers must file a petition to the DHS U.S. Citizen and Immigration Services (USCIS). After USCIS approves the petition, prospective H-2A workers outside the U.S. apply for a visa through the U.S. Department of State at a U.S. Embassy or Consulate and seek admission to the U.S. with the U.S. Customs and Border Protection (CBP) at a U.S. Port of Entry.

Open positions unable to fill

Rules are in place so that the H-2A program does not take jobs from domestic workers or lower the average wage. Before hiring H-2A workers, farm employers must demonstrate to the DOL that they are unable to recruit U.S. citizens for their open positions. They are also required to pay a state-specific minimum wage that may not be lower than the average wage for crop and livestock workers in their region during the prior year, known as the Adverse Effect Wage Rate.

Once approved, H-2A visa holders are allowed to work in the U.S. temporarily. The visa can be re-approved annually for up to three years. A worker loses their H-2A status if they leave their job. After a worker has three years of H-2A status, they are required to leave the United States for at least three months before applying to receive a H-2A visa again. The H-2A visa does not apply to a worker’s family members and does not give workers a way to gain permanent legal status. Unlike the H-2B program, there is no cap set on the total number of H-2A visas that can be granted each year.

number farmer workers exceeds visas

Greater need than visas

In 2019, nearly 258,000 immigrant workers were granted H-2A visas, with most working in Florida, Georgia, Washington, California, and North Carolina. Participation has jumped from 48,000 positions certified in 2005. However, the number of farm workers that are needed each year far surpasses the number of H-2A visas that are granted. Data from the U.S. Department of Agriculture (USDA) shows that the percentage of farm workers who are not legally authorized to work in the United States grew from 14 percent in 1989 to more than 50 percent in recent years.

While the H-2A program has grown in size, both farmers and farm worker advocates are critical of it. Farmers say it is a complicated, expensive process to navigate. Furthermore, year-round agriculture sectors like dairy farming, pork production or even mushroom farming can’t use the program since it is only available to seasonal industries. Labor groups argue H-2A needs reform to provide more protections to workers.

Agriculture’s workforce challenges recently received some attention on Capitol Hill. In December 2019, the full House of Representatives passed the bipartisan Farm Workforce Modernization Act (H.R. 5038). Among its many changes, the bill would make H-2A more flexible for employers and establish a new, capped program for year-round workers. It would also provide a pathway to permanent resident status for farm workers and include new enforcement measures. While the House’s passage of H.R. 5038 marks the first time that body has approved immigration legislation since 1986, the bill has not received a vote in the Senate.

The Trump Administration has also shown interest in updating the H-2A program, streamlining the application process on the USDA website. DOL issued a proposed rule in September 2019 that would update how the Adverse Effect Wage Rate is calculated, among other provisions. That rule has not yet been finalized. Additionally, in October 2019 the DOL issued a final rule to modernize the market labor test by allowing farmers to advertise jobs on a central online registry rather than a local print newspaper.

critical industry

COVID exacerbating labor shortage

Travel restrictions and government closures due to COVID-19 are adding to the concerns about America’s shortage of farm workers. The U.S. stopped processing non-emergency visas like H-2A in Mexico on March 18, 2020 out of health concern for U.S. Embassy employees. This immediately led to calls of alarm from agriculture stakeholders who are looking ahead to a busy spring and summer season.

The State Department later said it would continue processing H-2A applications and granted new flexibility so both new or returning workers would not be required to go to a U.S. consulate for an interview according to social distancing protocol. The DOL announced additional, temporary H-2A flexibilities in April 2020 to help prevent a labor shortage. However, governments around the globe continue to enforce travel restrictions to limit the spread of the coronavirus, potentially keeping workers from the harvest.

Some farmers are reporting that they are unable to get workers on time. In Canada, foreign workers have been delayed by border restrictions and canceled flights. Once they arrive, the Canadian government requires workers to be quarantined for 14 days (with pay) before they can begin work. The United States does not have a similar quarantine requirement but American farmers are concerned that fruit and vegetable harvests will still be impacted. Workers who have arrived are in the fields for longer hours due to the labor shortfall. Abad Hernandez Cruz, a Mexican farm worker in Georgia, told Reuters why he is working 12+ hours a day: “if the farm doesn’t produce, the city doesn’t eat.”

Agriculture is a critical industry

Agriculture has been deemed a critical industry during the pandemic. Americans are seeing firsthand the strengths and vulnerabilities of our complex food supply chain. One paradox is that farmers across the country have been forced to dump millions of gallons of milk and destroy millions of pounds of fresh food while some grocery store shelves go bare. The widespread closure of restaurants, hotels and schools has left farmers with no market for half of their crops due largely to the differences in Americans’ eating habits while quarantined at home.

So far, a lack of labor has not been a major force behind this food dumping. However, the situation could change if the pandemic persists longer into the harvest season or if farm workers begin testing positive for COVID-19. Farmers are also concerned that fewer workers will apply for H-2A visas over fears of catching the virus. Without enough workers, leafy greens, berries, and cucumbers would likely be the first crops to be left fallow, followed by peaches, plums, nectarines, and citrus.

The important role that guest workers play in ensuring America’s food supply during the pandemic underscores the interconnected nature of global agriculture trade. In reality, without H-2A and other immigrant labor, that romaine lettuce in Salinas would never make it to your salad bowl, or to other dinner tables around the world.

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Sarah Hubbart provides communications strategy, content creation, and social media management for TradeVistas. A native of rural Northern California, Sarah has melded communications and policy throughout her career in Washington, D.C., serving in government affairs, issues management, and coalition building roles in the agricultural sector. She is an alum of California State University, Chico and George Washington University.

This article originally appeared on TradeVistas.org. Republished with permission.