Based on Hogs and Pigs survey data released by USDA-National Agricultural Statistics Service (NASS) on December 22, 2017, the number of all hogs and pigs on December 1, 2017, was 73.2 million head, increasing 2.4 percent from the previous year. Iowa is the state with the largest hog inventory in the country. Iowa’s number of hogs on December 1, 2017, increased 2.7% to 22.8 million head from the count on December 1, 2016 (22.2 million head), with Iowa’s hog inventory representing 31.1 percent of total U.S. inventory of all hogs and pigs.

U.S. hog operations tend to be mainly concentrated in the Midwest (Iowa and Southern Minnesota, particularly) and in eastern North Carolina. Illinois and Indiana are also among the top-five hog producers in the country (see Figure 2).

USDA-NASS will release the Quarterly Hogs and Pigs report on March 29, 2018, which will include producer intentions for farrowings in the next two quarters.

Hog Cash Receipts

Based on USDA-Economic Research Service (ERS) projected data as of February 7, 2018, U.S. cash receipts[1] from hogs equal $21.084 billion in 2017, increasing 11.8 percent from 2016. U.S. hog cash receipts are expected to fall 0.41 percent to $20.997 billion in 2018 compared with 2017. The next USDA-ERS data release in August 2018, will contain the 2017 cash receipt as an estimate not as a projection.

As the top hog producer in the United States, Iowa holds the largest share of the market. In 2016, Iowa’s cash receipts ($6.35 billion) represented 33.7 percent of U.S. total cash receipts ($18.857 billion). As of February 7, 2018, USDA-ERS state cash receipts data is available up to 2016. 2017 and 2018 hog cash receipts for Iowa and the other top hog producing states were estimated based on their corresponding average shares of total U.S. cash hog receipts from 2010 to 2016. Each state average share during this 7-year period was applied to the 2017 and 2018 U.S. hog cash receipts projections. Based on these estimates, Iowa’s hog cash receipts for 2017 ($6.89 billion) and 2018 ($6.86 billion) would contribute with 32.7 percent and 33.1 percent of U.S. hog cash receipts, respectively. (see Figure 3). 

2017 Minnesota and North Carolina hog cash receipts would reach $2.61 billion and $2.43 billion, respectively. In addition, 2017 hog cash receipts for Illinois, and Indiana, were estimated at $1.36 billion, $1.13 billion, correspondingly (see Figure 3).

China Announced Tariffs on U.S. Agricultural Products, Including Pork, in Reaction to Recent U.S. Trade Measures

According to USDA-FAS Global Agricultural Information Network (GAIN) report, on March 23, 2018, China’s Ministry of Commerce (MOFCOM) announced proposal to levy tariffs affecting about $2 billion in U.S. food and agricultural exports to China. This is a retaliatory action to U.S. 232 Trade Action on steel and aluminum affecting China’s interests. MOFCOM announcement did not indicate when it will begin applying these additional tariffs. These proposed tariffs would be applied in addition to existing tariffs on an ad valorem basis for cost of goods, insurance, and freight (CIF) values.

The period to comment or summit additional information regarding both U.S. 232 Trade Action and China’s proposal by interested parties to MOFCOM, will end March 31, 2018. The application of these additional tariffs are not necessarily based on MOFCOM’s solicitation for comments. As indicated by USDA-FAS GAIN report, this is not a definite reading of the regulation. The GAIN report is a summary of the complete regulation written in Mandarin, with the complete regulation prevailing in case of any discrepancy.

Most of the commodities subject to China’s proposed added tariffs are agricultural products. These targeted commodities were split in two groups. The proposed additional tariff for the first group is 15 percent and encompasses 120 products. The first group includes five categories of products: 1) fresh fruits, dry fruits, and nuts products, 2) wine, 3) modified ethanol, 4) American ginseng, 5) seamless steel pipes.

The proposed additional tariff for the second group, is 25 percent.  The second group includes two categories: 1) pork and pork products, which encompasses seven commodities, and 2) recycled aluminum.

China is the largest pork producer, consumer, and importer in the world. The United States is the third largest pork exporter after the European Union (EU) and Canada. China was the fourth largest market for U.S. pork and pork products in 2017.  Data from USDA-FAS indicates 2017 U.S. shipments of pork and pork products to China were valued at $0.5 billion (275,383 metric tons (MT)) representing 7.9 percent of U.S. total pork and pork product export value (Table 1). In volume terms, in 2017 the United States exported 275,383 metric tons (MT) of pork and pork products, making up 11.4 percent of total U.S. pork and pork product export volume.  However, the value of U.S. pork and pork product exports to China was down 15.3 percent in 2017, equivalent to a volume reduction of 54,714 MT from the previous year.

U.S. pork and pork product export decline to China in 2017 reflected China’s increased pork domestic production, triggering lower pork imports from all sources, not just the United States. According to USDA-FAS (October 2017), China’s pork production will continue to grow as producers respond to positive outcomes. Increases in the sow herd and higher finished weights will boost China’s pork production in 2018. 

Based on the latest (March 8, 2018) USDA-ERS projections, both U.S. pork production and exports are expected to grow 5.2 percent in 2018 compared with 2017. 2018 pork production and exports are projected to reach volumes of 12.21 million metric tons (MT) and 2.69 million MT, respectively. Expected higher production in 2018 is due to higher pork carcass dressed weight. U.S. pork exports data for January 2018, showed strong demand (particularly in Asian markets) compared with the same period last year.  Updated projections for 2018 U.S. pork production and exports will be released by USDA in April 2018.

Some of the countries expected to increase pork imports in 2018 includes Mexico, the Philippines, Australia, Canada, and Chile. According to the USDA-FAS projections (October 2017), these five countries combined are expected to generate an added pork import demand from all sources of about 145,000 MT in 2018. Mexico and the Philippines are expected to generate 52 percent (75,000 MT) and 24 percent (35,000 MT) of the added total pork import demand projected in 2018, respectively. These USDA-FAS projections will be updated also in April 2018. Last year, Mexico and Canada were the second and third largest markets for U.S. pork, respectively, after Japan, the number one market.  In addition, Australia, the Philippines, and Chile were the eighth, tenth, and eleventh markets for U.S. pork in 2017, correspondingly.

As the number one hog producer in the United States, Iowa’s hog industry generates the largest hog cash receipts. At the state level, Iowa’s hog cash receipts are the second largest cash receipts in the state, after corn. Overall, the United States exports about 22 percent of its pork production. China’s proposed added tariffs on U.S. agricultural products include pork and pork products. Adding a 25 percent tariff on U.S. pork and pork product imports would have a direct negative impact on U.S. agricultural farm belt states, particularly Iowa. China is the largest pork producer, consumer, and importer globally. Currently, China is the 4th largest market for U.S. pork.

[1] Cash receipts are the receipts from marketings and any sale of farm-slaughtered hogs and pigs, including an allowance for feeder pig out-shipments.