Southeast Asia Trade Opportunities-Part I
Terry O'Neel, President , National Pork Board
Don Wick: 00:04 From the Pork Checkoff in Des Moines Iowa, it’s Pork Pod. Pork Pod, a look at the hot topics in today’s pork industry. The Pork Checkoff is working for you through various forms of research, promotion, and consumer information projects. This is Don Wick on behalf of the Pork Checkoff, and today our guest is Terry O’Neel, President of the National Pork Board. Terry led a National Pork Board trade delegation to South East Asia. Both Japan and China. Terry, if you would, would you recap the trip for us?
Terry O’Neel: 00:37 It was a trip the officers from the National Pork Board took along with Bill Even and John Johnson, to go to Tokyo Japan and then we visited four cities in China. We visited the city of Shanghai, Suzhou, Xi Jiao and finally Beijing, where we wrapped up with the U.S. China Swine Industry Symposium. And Bill Even and I spoke at that symposium on the 15th of September. A lot of this was lined up by USMEF, primarily, and then we worked closely with them. We attended also in Tokyo, earlier in the trip, we attended the 40th anniversary of the Tokyo office for the USMEF, and a meat buyers conference. So we had a tasting there of U.S. pork dishes and I got to meet a lot of meat buyers there in Tokyo. So it was an excellent excellent trip, very hands on. Very focused on trade. Got to go to one packing plant. See a brand new Smithfield processing facility, where they’re processing hams. I don’t know if you know this, but U.S. cannot export processed meat into China. So Smithfield’s bringing in U.S. product and then processing it right there in China.
Don Wick: 02:05 Let’s talk a little bit about some of the portions of that trip, maybe starting with Japan. USMEF you mentioned working closely. Obviously they have relationship boots on the ground that really can help you connect to those meat buyers.
Terry O’Neel: 02:21 Oh they certainly do. And they’ve been there like I said for 40 years. Japan’s probably the country we invest the most in. It’s a very high value export destination for U.S. pork, primarily high value loins. And they are very oriented toward quality and over versus quantity as far as the Japanese go. They like very superb presentation of their products. So that’s one thing you have to be concerned with. We have a variety of things going in there but primarily loins.
Terry O’Neel: 03:05 One thing we did see that very popular there is tonkatsu, t o n k a t s u. It’s a breaded pork cutlet and that was at the tasting. That’s been a very popular dish with them in their lunch boxes or bento boxes. And we sell a lot of that U.S. pork for that product. Like I said, loins are very popular there too. Also it’s becoming more popular now in the shabu shabu, which is a way of boiling meat and slices of meat. It used to be primarily pork, or primarily beef. And now they’re experimenting with more pork and that’s gone over really well. We did have shabu shabu one of the last days we were there. We tried some pork and it was wonderful. So those are some of the things we do, work closely with with those guys that know the buyers.
Terry O’Neel: 04:09 They have the relationships with the buyers and that’s what’s extremely important in the Asian market. You know, it’s safety and quality first, and then after that you have to have those relationships built. Otherwise you’re not going to be able to sell in that country. Now price is somewhat secondary, especially in Japan. So they want they want the best product. And in particular for our product is chilled. United States and Canada are two of the major exporters that can export chilled product into Japan and they prefer that taste. So Canada right now is our biggest competitor. They are importing a lot of pork, chilled pork into Japan. We actually did attend, we went to a Canadian style restaurant and saw Canadian Pork, is based on a Canadian production, how they produce pork there. And everything you want to know about Canada is in this Highlife restaurant and we attended that and we were very impressed by that.
Terry O’Neel: 05:20 So that’s one way that our competitors are actually getting there too. But we think we’ve got a very good future. I think what really is a challenge for us is the trade issues and stepping away from TPP was not a very good decision as far as U.S. pork in Japan. And we were hoping for a bilateral agreement, but it just, that’s going to be one of the biggest barrier and challenges is trade, trade barriers.
Don Wick: 05:52 On the Chinese side of things, obviously they’re huge producer of pork themselves. It’s got to be an interesting dynamic to export into that marketplace.
Terry O’Neel: 06:02 It is. And we attended this symposium, and it was basically with Chinese pork producers. So we’re out there trying to sell your products from the podium and interacting with people, and you know these guys are not, you are not welcome there because they know you’re going to take part of their market. But I think they’re getting to the point where they’re believing, much like the Japanese do, that we can’t raise it all. Typically, right now, I think China is raising somewhere between 97 98 percent self-sufficiency in pork. You think , wow, we’re only going to get two or three percent, while 1.4 billion people that are eating a lot of pork, that makes a lot of tonnage. I don’t have the tonnage off the top of my head, but China was one of the biggest export destinations this last year. So because of that they import a lot of U.S. pork.
Terry O’Neel: 06:58 And particularly with help from the Smithfield Group, which is owned by Shauanghui, that’s helped things quite a bit. We’ve got some work to do as far as making sure we watch the ractopamine issue because that’s a nonstarter for them. They have to be ractopamine free and most people, producers in the United States question that, oh it’s science based and all that. Well they’ve had issues. You have to understand the Chinese people have had issues with food safety, with melamine in milk, and Clenbuterol in pork. And this is a huge food safety issue. It’s just, it doesn’t translate for you to say, well yeah we use this product and it’s supposed to help them grow faster and have a leaner meat. They don’t care. You cannot use it, because for them it’s just….you can’t do it. So they’re not going to buy from you. So that’s one thing that producers and packers need to get into their heads. I think if it’s hit home, that we cannot be using ractopamine if you want to sell to China.
Don Wick: 08:11 What did you learn from the Chinese farmers themselves? Obviously most of the production is still small, small family type operations.
Terry O’Neel: 08:19 Yes. Well here is the theme of symposium was price risk management, policies, forums, in a way they can handle price risk. They have no futures market over there.
Terry O’Neel: 08:37 So I’ll give you a little background. Their market goes up and down much more than ours does because they’re hog price is tied very close to the meat price and the meat price varies pretty much directly with the hog price. Here in the United States, we kind of mitigate that and try to keep a more even meat price for our consumers so they don’t get sticker shock and don’t back away from pork. But there, its tied directly. Primarily because like you said there’s a lot of back to our farmers with 50 million pig producers in China which is about an average of roughly 10 pigs per farmer. What they’re trying to do, their solution is to shift away from the backyard pork operations, which we’ve seen because they have the down prices, they had the pigs floating in the river because they were dumping them. They had environmental issues with manure.
Terry O’Neel: 09:37 So what they’re doing is the government, which a communist government can do this, they’re shutting down these poorer operations. They are shutting down the smaller processing facilities and forcing more toward an integrated system of larger operations, or medium operations, maybe three to five thousand head per year, and large operations a little bit more than that. So doesn’t take much to be large in China because there are so many small ones. That’s the question they had for us. What size is your operation? Well we worry so much here too. But what they’re going to do is force more toward an integrated system where they have fewer modern production facilities, larger packing plants and hopefully that’s going to smooth out that hog cycle. And they’re also looking at maybe adding futures market. We’ll see how well that works out. And there’s also these government subsidies that help producers there to produce pork, which we don’t have here, direct government payments on the pork side.
Terry O’Neel: 10:46 They’re concerned about you know U.S. pork coming in. They don’t want it to be like soybeans because I believe they’re importing maybe 40 to 50 percent of their soybean needs. So that’s the concern they have as producers. But they know they can’t run so close to the knife or they can produce all their meat. They want to share technologies back and forth. They want to learn from us, you know, and in return they’re going to let us import some pork. Like I said, no processed pork, but it works great for us because we’re able to import a lot of variety meats, which we won’t eat here. And that’s where they short there. They don’t have enough variety meats to go around. Unless the tastes of a new generations change.
Terry O’Neel: 11:31 It’s a pretty good balance, so it’s working out well so far. You know there’s issues of, you know, importers can get fickle about prices and stuff like that but so far it’s working pretty good. We imported a lot of U.S. pork to China this year.
Don Wick: 11:49 An amazing trip. We’ll have more in future podcasts. Thank you for listening to this edition of Pork Pod. For more information on this topic, or the Pork Check off itself, visit pork.org.