Concerns for Iowa’s massive pork industry are festering as a trade conflict between the United States and China brews.
China announced Monday it will levy tariffs of up to 25 percent on 128 products, including pork and ethanol, which drive Iowa’s agriculture-focused economy. Pork was hit harder than any other U.S. product except for aluminum scrap.
But what does that mean for you, the Iowa grocery shopper? Prices might go on a roller coaster throughout the next 12 months. Here’s the scoop so far.
Immediately, you probably won’t notice anything
For now, you literally might be able to bring home the same bacon for the same price the next few months.
No matter what happens in politics, it takes a while for livestock producers to adjust to change, said Iowa State University agribusiness professor Dermot Hayes. Between breeding and taking a hog to market, the process can take up to a year.
“That’s the biology,” he said.
Market analyst Keaston Handeland of Ames-based ag risk management firm Kerns and Associates said a temporary surplus of meat would probably be devoured by our annual summer grilling habits.
In terms of prices for you, that means things should stay the same.
If tariffs stay in place, then prices could actually go down
If China’s penalties stay in place for months or longer, outcomes get increasingly speculative.
Hayes said the next step would actually be a reduction in prices of items such as hams and shoulder meat, although just how long the financial honeymoon would be is unclear.
… But leaving NAFTA could create total chaos
On the grander scale, the real timeframe in which frozen-section mania could erupt is if President Donald Trump follows through on threats to alter U.S. participation in the North Atlantic Free Trade Agreement. A full withdrawal could cost the U.S. pork industry $1.5 billion and send producers into a tailspin, according to National Pork Producers Association spokesperson Jim Monroe.
“We value all export opportunities,” Monroe said. “The relationship with China is important. The relationship with NAFTA partners is critical.”
Take away any of America’s largest and closest partners, and then the effects become real, Handeland said.
“Once we get through the peak of the summer, if NAFTA is terminated and this (Chinese) tariff on pork is there, then at that point, that’s when you would really see (prices) fall off,” he said.
Those developments alter the market enough to make a profit more of a gamble, Hayes said.
“Some producers will forge ahead, but smaller or outdated facilities may decide to quit the business,” he said.
Following this train of thought, if production goes down, then so will supply, eventually.
“Over the long haul, if you’re producing less animals, then there will be less bacon and ribs to go around,” Hayes said.
You could also see packing plants decide to cease production altogether. It’s Economics 101. After supplies tighten, then prices could start climbing.
The longer tensions linger, the more everyone loses
Area grocers, for their part, are silent. Iowa-based companies Hy-Vee and Fareway, along with the Iowa Grocery Industry Association, all either declined comment through spokespersons or referred questions to the Iowa Pork Producers Association.
Association public policy director Tyler Bettin said Monday evening that it’s too soon to speculate on long-term pork price forecasts, given continued negotiation between China and the U.S.
Bettin stressed the influence the pork industry has on the Iowa economy, saying about 1 in 12 residents has an industry-connected occupation.
Economic experts offered a multifaceted approach.
“Our takeaway should be that these things don’t have immediate impact, and that the Chinese situation pales in comparison to NAFTA,” said Steve Meyer, an economist for Kerns and Associates. “Mexico is much, much more important. And we need to recognize there are always winners and losers in trade deals. Agriculture and the pork industry have been big winners.
“…Sometimes, it’s your turn to be a loser, and certainly (pork producers) are among the groups getting harmed by the actions with this administration.”
Terry Branstad is trying, by the way
For his part, former Iowa Gov. Terry Branstad, now the U.S.’ ambassador to China, tried to toe the line to cooperation in an interview last week with Bloomberg News.
“I think hopefully the Chinese will realize we need to work together on these issues, and retaliation is not the answer,” he said.