1 big thing: U.S. pork industry wants to cash in
The U.S. pork industry — whose commodity was among the hardest hit by China's retaliatory tariffs — breathed a sigh of cautious relief following news of a deal that winds down tensions between the U.S. and China.
Why it matters: The deal in theory is a reprieve for farmers, a key part of President Trump's base who have borne the brunt of the trade war. China's purchases of goods like soybeans and pork have waned in the nearly two-year battle — pushing rural America into a financial tailspin in an otherwise solid economy.
Driving the news: U.S. officials said China would up annual purchases of U.S. farm goods to at least $40 billion over a period of two years.
- But there are no details yet on which goods it'll buy or how China plans to absorb that level of imports. The most China ever purchased from U.S. producers was $29 billion in 2013, per Bloomberg.
- Hog futures — along with other commodities — rose 1% on news of the deal.
Industry experts say the ceasefire could create new prospects for farmers — but won't undo the missed opportunity to cash in on China's pork shortage, partly due to African swine fever.
- Pork exports to China haven't "accelerated at the rate that it could have if we didn't have these [trade] obstacles," Joe Schuele, head of communications at the U.S. Meat Export Federation, an industry trade group, tells Axios.
The backdrop: The trade war coincided with a breakout of African swine fever, a deadly pig disease that killed hundreds of millions of hogs in eastern Asian countries, as Axios' Jacob Knutson reported earlier this year.
- The epidemic had China — the world's top pork consumer — looking offshore to fill the supply gap, a potential goldmine for U.S. farmers.
- U.S. ramped up herds in anticipation of more demand, with processors slaughtering about 1 million more pigs per week than a year ago, per Reuters.
Yes, but: The U.S. pork industry faced three rounds of retaliatory tariffs. In 17 months, tariffs on pork exports to China increased sixfold (from 12% to 72%).
- That made it less palatable for Chinese buyers to turn to the U.S. for help, but not totally out of the question.
- Those that did import from the U.S. sometimes pushed the price hikes back onto U.S. packers and producers — making it less profitable to export to China, Schuele says.
As a result, European suppliers have capitalized much more on China's pork shortage. So has Brazil.
What's next: "We're encouraged that a deal has been reached and we're anxious to get the details," Schuele says — a sentiment echoed by the industry's most prominent trade groups.
- There may be some opportunity to take advantage of China's upcoming all-important Lunar New Year celebration, which tends to be the country's biggest period of pork consumption.