Hog Farmers Face Second Round of Tariffs

U.S. pork producers have been hit by a second batch of hefty retaliatory tariffs from China and Mexico. Some big producers are bracing to lose big money; others are thinking about investing overseas.

Executives say the pork industry has been expanding in recent years, in part in response to the expectation of export opportunities. That stands to change.

“We put a halt on all investment, not just because we will be losing money, but because we don’t know if growing in the U.S. is the right move if we won’t be an exporting country,” said Ken Maschhoff, chairman of Maschhoff Family Foods and co-owner of the nation’s largest family-owned pork producer.

Maschhoff said the farm industry has been “asked to be good patriots. We have been. But I don’t want to be the patriot who dies at the end of the war. If we go out of business, it’s tough to look at my kids and the 550 farm families that look us into the eye and our 1,400 employees.”

China on Friday started collecting an additional 25 percent tariff on imported U.S. pork, which when added to the previous import taxes, created a tax exceeding 70 percent, according to Rabobank.

Maschhoff said the tariff will result in a hit of $100 million for his Illinois-based family farm operation, which markets about 5.5 million hogs a year and operates in 10 states.

China also added tariffs last week on U.S. soybeans, corn, wheat, cotton, whiskey and dairy. Nearly $20 billion in U.S. agricultural exports went to China last year, with more than half of that amount coming from soybeans.

Mexico imposed a 10 percent tariff on chilled and frozen pork muscle cuts effective June 5, and that import tax doubled to 20 percent last week.

“It’s pretty apparent that these countries will go after, by and large, Trump supporters from a political base standpoint since items exported by red states are the ones being targeted,” Maschhoff said.

China ranked as the second-largest volume market for U.S. hog producers last year. Mexico was the largest volume market. The Mexican and Chinese markets have been seen as especially important to U.S. pork producers because they buy products that Americans typically don’t, such as raw hams and variety meats like tongue, ears, snout and heart.

Source: CNBC