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Pork Commentary: Canada-Mexico Win Trade Case

by 5m Editor
23 November 2011, at 5:45am

CANADA - In this week's Pork Commentary, Jim Long writes about the latest Country of Origin Labelling (COOL) win between Canada and Mexico.

Canada and Mexico won a trade case against a US law on meat labeling at the World Trade Organization (WTO) last Friday. A WTO dispute panel agreed with their complaint that US mandatory Country of Origin Labeling was too stringent, giving US cattle and hog sales an unfair advantage over imports from Mexico and Canada.

  • The US Trade Representative office said the panel affirmed the right to adopt labeling requirements and confirmed requirements, "We remain committed to providing consumers with accurate and relevant information with the respect to origin of meat products that they buy at the retail level."
  • Canadian Agriculture Minister Gerry Ritz said the ruling marked a "clear win" for Canadian beef, pork, and other livestock producers.
  • Mexico, Canada, or the United States can appeal the ruling in 60 days. It is expected the US will appeal.
  • Doug Wolf, President of the National Pork Producers Council (NPPC) the trade group (NPPC) opposed the labeling requirement when it was being considered by Congress, in part because of trade implications for trade relations. He said the costs "far outweigh any benefits and the US risks a ‘trade war’ with its neighbours if the decision stands and the US fails to comply."

Our Observations:

Over 25 per cent of US pork is being exported, Doug Wolf the President of NPPC is wise to articulate opposition to Country of Origin Labeling. The US needs global market access, building a template for other countries to restrict pork imports is not a good policy.

US Retail Meat Prices
October
Beef $4.90 per pound Up 10 per cent compared to October 2010
Pork $3.05 per pound Up 4 per cent compared to October 2010
Chicken $1.76 per pound Up 1 per cent compared to October 2010

Price is a reflection of demand. Red meat (beef and pork) command a dominate price point over chicken. People vote with their money – they want what they want.

If we use the USDA’s projected disappearance of meat per capita and put retail price per pound on each category it gives a very rough estimate of money spent per person on each.

November 2011 projected Per Capita annual disappearance
Times retail price (November)
Beef 57.6 pounds X $4.90/pound $282.24
Pork 45.9 pounds X $3.05/pound $139.99
Chicken 83.2 pounds X $1.76/pound $146.32

There is no doubt red meat (beef – pork) is the choice of consumers with almost 3 times more money spent on them than chicken. Despite what is considered tough economic times US consumers are showing that they will spend more total dollars and significantly more money per pound for red meat compared to chicken. In retrospect it was a good idea to get rid of the Pork ‘Other white meat’ programme consumers want red meat.

Other Observations

  • USDA cash early wean average last week $39.53 and cash 40 pound feeder pigs $57.57; small pigs showing the seasonal trend up $20 per head in the last three months. We expect cash feeder pigs will reach $80 per head in the new year.
  • Sow marketing’s continuing at levels which we believe indicates if not liquidation, little if no expansion. The latest weekly sow marketing’s of 66,069 are at levels about 10,000 a head above what we believe is equilibrium. Hog to corn ratios fewer than 15:1, which we have, has never and will never lead to expansion.
  • The Global Grain conference was held last week in Geneva Switzerland. We understand the conference included discussions on global wheat inventory that is the highest in ten years. On that note wheat closed at $5.98 a bushel on Friday. The lowest previous close in the last five years wheat on the CME was $5.84 a bushel on 10 June 2010. Indeed on 9 February2011 wheat closed at $9.82 a bushel. That is a decline of almost $4.00 a bushel since then.

At the conference there was a premise that wheat which directly substitutes for corn in swine and other livestock poultry rations will do two things. Keep a lid on corn prices from increasing dramatically as wheat is a price competitive feeding option. Also that global wheat supply and prices would cut US corn exports. Since 1 September US corn exports 277,677 (thousand bushels) last year the same time period 353,970 (thousand bushels) or down about 25 per cent.

This scenario is a big plus for hog producers by helping keep a lid on feed prices are already at historically high.