Canadian exports stumble in Q1

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In the first quarter of 2018, Canadian pork exports slipped by 3% year-on-year, to 240,000 tonnes.

With average prices also falling, the value this trade declined further, by 6%, to $782 million Canadian dollars. The Canadian pork industry is heavily reliant on exports, with approximately two thirds of its pork production being exported.

A drop in Canadian pig slaughter in the first quarter of 2018 may have limited supplies available for export. According to Statistics Canada, pig slaughterings were 2% lower year-on-year in the first quarter of 2018, with the decline driven by the Western states. This may have been influenced by productivity challenges in 2017, particularly with PEDv. Live pig exports to the US were also 6% (-91,000 head) lower than in Q1 last year, although this was likely influenced by limited US demand for additional pigs as its domestic production expands.

Looking at the trade figures in more detail, the 19% decline (-12,600 tonnes) in shipments to China accounted for most of the drop in export volumes. This reflects lower Chinese import demand this year. With production in the US also rising, shipments to this destination also fell 6% (-4,300 tonnes). However, trade with other Asian countries proved more positive. More pork was shipped to Japan, South Korea, Taiwan and the Philippines in the first quarter of 2018, compared to Q1 last year. Trade with these countries may continue to increase in importance moving forwards, as prospects for shipments to China and the US look more difficult.

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Despite the slow start to the year, the USDA forecasts Canadian pork production to increase 2% for 2018 as a whole, reaching 2.0 million tonnes. This reflects continuing expansion in the breeding herd. Throughputs have already picked up in recent months, climbing 1% on 2017 levels in both April and May.

With this in mind, export volumes will need to pick up; 2% growth on 2017 volumes has been anticipated for this year. Particular opportunities in recent months may have stemmed from the US trade dispute with China, as the relative competitiveness of Canadian pork in this destination will have increased. Further opportunities may be available if Mexico persists with its recently imposed tariffs on US pork.

However, increasing challenges for the US industry will not necessarily be positive for Canada. As the US is the largest importer of Canadian pork (around a third of export volumes), weaker US markets will ultimately drag on Canadian prices. As such, the outlook for the rest of the year remains somewhat uncertain, with much resting on the outcome of US trade talks and NAFTA modernisation.

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Bethan Wilkins, Analyst

bethan.wilkins@ahdb.org.uk, 024 7647 8757