Economic Impact of U.S. Pork Trade

December 24, 2007 — Glenn Grimes, Ron Plain, Steve Meyer

The changes in U.S. pork trade in the past 21 years are quite impressive. U.S. pork exports have grown from 86 million pounds carcass weight equivalent in 1986 to 3 billion pounds in 2006. Another comparison shows that the U.S. has gone from a negative 1.036 billion pounds net export in 1986 to a positive 2,008 billion pounds in 2006 (Table 1).

The value of pork and pork byproduct exports has grown from $1.97 per hog slaughtered in 1986 to $27.34 per head slaughtered in 2006 (Table 2).

These changes in trade have permitted the pork industry to grow at an additional rate of about 0.8% per year on average over the last 21 years. In other words, the U.S. pork industry was about 16 million head larger in 2006 than it would have been had pork imports and exports remained at 1986 levels.

Not only has the increase in the quantity of pork traded allowed the industry to grow without lowering prices, but it has also added to producers' incomes in the years when net exports grew. Table 3 shows our efforts to calculate the effect of imports and exports on the price of hogs between 1986 to 2006. We believe these estimates are conservative because they show that prices increased only in the year when net exports grew. In other words, we assumed producers reacted to higher prices by increasing the U.S. herd enough to offset any price benefits from net export growth in the following years. Some observers do not believe producers could react this quickly or increase production enough to completely offset benefits in the following years.

Pork producers can take credit for much of this export growth. They have improved the quality of pork which has made it more competitive and funded promotion efforts. Efforts by the U.S. government to liberalize trade, as well as improved per capita incomes in many countries were also important factors in increasing exports. Japan is the largest U.S. pork customer, purchasing nearly 34% of our exports in 2006. Mexico is second and Canada is third in tonnage purchased from the U.S. Table 4 shows our most important pork customers by their percentage share of U.S. pork exports purchased in 2006 based on carcass weight equivalent.

Three major groups in the U.S. have contributed to the promotion of pork exports. They are USDA, the U.S. meat packing industry, and hog producers. No studies have been made, that we are aware of, to determine the amount of credit each of these groups should receive for increasing the growth in pork exports. Pork producers alone have spent nearly $59 million in the last 21 years to promote exports through Pork Checkoff funds. We believe the total income of all U.S. pork producers has been improved by $7.4 billion over the last 21 years by the increase in exports (Table 3). Less than 11% of this would be required to repay all of the $833 million in Checkoff contributions by producers during this period.

This study was funded by the University of Missouri and National Pork Board.

If you want to see all the charts go to US Pork Trade Economic Impact.

Source: MeatFYI, December 21, 2007

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Glenn Grimes -- Professor Emeritus, Agricultural Economics,University of Missouri-Columbia;
Ron Plain -- Professor, Agricultural Economics, University of Missouri-Columbia;
Steve Meyer -- President, Paragon Economics, Des Moines, Iowa