Pork Farmers Will Benefit from China Trade Deal

January 20, 2020
274 Views

China and the United States signed a much-publicized Phase One Trade Deal last week, setting a framework for better relations between the world’s two largest trading partners. While this deal falls short of fixing all disagreements, it’s an important early step.

China will still have to address issues with how it subsidizes its economy, and American trade officials have called for a hard-end to state-sponsored industrial espionage. While a more comprehensive deal could take years to secure, there are some wins to enjoy for now

The agricultural sector, for example, will see a significant boost from the deal. Pork farmers will see direct benefits.

Trade Deal is Great News for Pork Producers

Each month, around 26% of the pork exported from the U.S. ends up in China. Pork is a major component of Chinese cuisine, and with a growing middle class, more families can afford to buy this high-quality protein.

While China is no slouch in pork production, it is currently facing a unique issue. African Swine Fever has surfaced in the Chinese pork livestock population, as well as in other parts of Asia. More than 100 million pigs were lost to the disease in the past year.

Neighboring countries have also seen outbreaks, so sourcing pork from within the region has become particularly expensive. This didn’t change, even after China released some of its emergency pork reserves.

U.S. farmers could come to the rescue. Due to the disease outbreak, Chinese pork now sells for around $3 per pound. American pork, even with tariffs, taxes, and high transportation costs, comes in at around half the price per pound.

Under the Phase One Trade Deal, China has promised to buy $200 billion worth of U.S. goods and services. 16% of this total will be made up of pork products.

How Can Investors Benefit?

The boost to agricultural producers will have far-reaching benefits throughout American communities. Investors can also benefit, too.

Seaboard Corporation (NYSE: SEB) is a major pork producer with a pricey but compelling stock considering recent news. Tyson Foods Inc. (NYSE: TSN) is another major producer with a more affordable stock that could grow as exports increase.

The trade deal might not be exactly what politicians, investors, and economists wanted, but it is undoubtedly much better than the high-tension environment of recent months.

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