Illustration: Eniola Odetunde/Axios
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.
- Pork prices in China surged triple digits from the prior year in November. The jump in prices pushed China's overall inflation index to rise at the quickest pace in about eight years, per the latest data from the Chinese government.
- 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.