By DOUG SCHMITZ

Iowa Correspondent

WASHINGTON, D.C. — In response to President Donald Trump imposing $50 billion in import tariffs April 3 for what he called China’s “illicit trade practices,” the country last Thursday slapped retaliatory tariffs on U.S. pork and 106 other agricultural products.

On April 5, Trump imposed an additional $100 billion in China tariffs, saying “the trade war with China was lost years ago,” which, he added, was “ignored for years by Washington.

“Rather than remedy its misconduct, China has chosen to harm our farmers and manufacturers,” Trump said, adding USDA Secretary Sonny Perdue will “use his broad authority to implement a plan to protect our farmers and agricultural interests.”

China’s tariffs on pork came on the heels of the USDA’s March 1 Quarterly Hogs and Pigs report, which showed a record United States inventory of all hogs and pigs totaling 72.9 million head, up 3 percent from March 1, 2017, but down 1 percent from Dec. 1.

Of those, 66.7 million were market hogs and 6.2 million were for breeding, increasing by 2 and 3 percent, respectively, from the same time last year.

“We’re certainly in an expansion cycle,” said Dan Bluntzer, a partner with New Frontier Capital Markets in Corpus Christi, Texas, during a March 29 teleconference sponsored by the National Pork Board in Des Moines. “That should continue as we fill up packer capacity.”

The report said Iowa hog producers had the nation’s largest inventory, at 22.6 million, up 5 percent from the previous year. North Carolina and Minnesota had the second- and third-largest inventories with 8.9 million and 8.5 million, respectively.

In Illinois, the state’s inventory was 5.3 million, up 1 percent from last March. Indiana’s total inventory was 4.05 million, unchanged.

Michigan’s total was 1.2 million, up 90,000 from a year ago. Ohio’s total hogs and pigs were 2.9 million, up 250,000.

The report also said the national December-February pig crop, at 32.3 million, was up 4 percent from 2017; sows farrowing during this period totaled 3.06 million, up 2 percent.

“The big supply underscores the importance of the export market and domestic demand,” said Kevin Bost, president of Procurement Strategies in Elgin, Ill., who analyzed the report with Bluntzer and John Nalivka, president of Sterling Marketing in Vale, Ore. “Both will have to be stout to absorb this demand.”

USDA said hog producers intend to have 3.08 million sows farrow during the March-May 2018 quarter, up 2 percent from the actual farrowings during the same period in 2017 and up 4 percent from 2016. Intended farrowings for June-August, at 3.16 million sows, are up 1 percent from 2017 and 4 percent from 2016.

Despite the drop in hog prices last month, Nalivka said meatpackers still have a good cut-out value of around $20 per head. “We’ve seen about a 4 percent increase in slaughter this year and a 5 percent increase in pork production. And we certainly can’t complain about the demand side of our domestic markets, which have been supported by a strong export market and we expect that to continue.”

Despite March’s record hog numbers, Chris Hurt, Purdue University professor of agricultural economics, said China’s 25 percent tariff on pork will likely cause the U.S. to lose most of that nation’s export business.

“This is a measure of the biggest potential impact on prices, but the actual price reduction will most likely be less,” he explained. “U.S. pork prices will drop due to the Chinese tariff, and these lower U.S. prices will help sell some added pork domestically.

“While China seems to have chosen well by selecting pork for these tariffs, the negative implications are deeper for the U.S. pork industry. The view looks different from the Midwest pork center.”

On a live weight basis, Hurt said hogs are now expected to average about $48.50 this year, with cost now estimated near $53; losses of $4.50 per live cwt. or about $12.50 per head are expected.

“The trade hammer has fallen on the U.S. pork industry,” he said. “If the current outlook shift toward losses prevails, all expansion projects still currently on the drawing board should be reconsidered. Further, if the current negative outlook prevails, some downsizing of the breeding herd into 2019 may be needed to move supply downward to provide breakeven prices.”

Dave Miller, Iowa Farm Bureau Federation director of research and commodity services, said there are three fundamental questions that apply in determining the potential impacts of tariffs.

“First, are there alternative suppliers that have the capacity to supply the product at competitive prices and that are not subject to the tariffs?” he asked. “Second, are there substitutes that can replace the products and avoid the tariff?

“And third, if there are not alternative suppliers or substitutes, then to what degree will the tariff (tax) reduce consumption?”

Neil Dierks, CEO of the National Pork Producers Council, said the NPPC was “disappointed that China has placed an additional 25 percent tariff on U.S. pork exports.

“Exports are extremely critical to the financial well-being of our producers,” he said in an April 4 statement. “We are pleased that the U.S and (South) Korea were able to reach an agreement that has not prejudiced U.S. pork producers or other sectors of U.S. agriculture,” referring to the U.S.-Korea Free Trade Agreement signed June 30, 2007.

“We recognize that the U.S. and China are negotiating, and we are hopeful that the 25 percent tariffs on U.S. pork will be short-lived.”

Sen. Lindsey Graham (R-S.C.) agreed with Trump imposing tariffs on China, saying, “Nothing will ever change when it comes to China’s business practices until somebody starts pushing back. It is not too much to ask for China to stop stealing intellectual property and open up their markets that are closed due to heavy-handed Chinese government barriers to foreign business enterprises.”