U.S. pork production increased by 11% at a time when higher feed costs should have caused a 6%
reduction in output. The industry has not yet felt the full economic costs
associated with this output expansion due to a perfect storm of other events
that worked to mitigate the impact of these economic forces. Key among these
events was a weakening of the U.S. dollar and a dramatic expansion of U.S.
exports to China. When and if the dollar strengthens, this will cause hardship
for U.S. pork producers even as it reduces feed costs. China imported more
pork because it made political and economic sense to do so. Now that the
Olympics are over, much of the political reason for these imports has been
eliminated. This means that exports will be maintained only if the Chinese
government allows market forces to operate. As labor shortages emerge in
China, fewer farm families will be willing to produce backyard pigs, a sector
that currently produces about half of all the pork produced in China. If China
responds to this problem by allowing a continuation of imports, then U.S. pork
producers might dodge the bullet and export their way out of the problem of
increased production. However, if China decides to restrict pork imports
despite these economic forces, then the U.S. pork industry will need to cut its
sow numbers by about 3%. This is less than one might otherwise have
expected in part because other countries have already adjusted and because
the price of almost all other foods has also increased.