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Prestage COO on China tariffs: No change in processor’s plans in Wright County

Null, who met with Branstad in China, characterizes trade issues as ‘bumps in the road’

April 13, 2018
By CHAD THOMPSON - Messenger staff writer (cthompson@messengernews.net) , Farm News

By CHAD THOMPSON

cthompson@messengernews.net

EAGLE GROVE - Prestage Foods of Iowa's chief operating officer was in China on business the night before potential tariffs on U.S. pork were announced two weeks ago.

Jere Null is a top executive for Prestage, the company that is building a $300 million pork plant south of Eagle Grove.

Null planned a trip to the country to visit with potential customers and Terry Branstad, the U.S. ambassador to China who is Iowa's former governor.

While there, Null said it was anticipated that there would be some retaliation to tariffs imposed on China by President Donald Trump on about $50 billion worth of Chinese imports, including Chinese steel.

"I think our government knew that there would be likely some type of retaliation," Null said. "We were certainly told by the folks in China and the ambassador that the United States doesn't want a trade war, but the United States feels very strongly that it needs a better balance comprehensively on trade."

On Monday, it was announced that Beijing would officially impose a 25 percent duty on U.S. pork, among other goods.

"As a pork producer, this worries us and we are concerned, but we understand the need for reform in the trade with China and that's what Trump is trying to do and that's what the whole bureaucracy is trying to do, starting with Terry Branstad," Null said.

Null came away impressed with Branstad's diplomacy.

"I thought he was very much in control," he said. "He talked about efforts to promote Iowa products in China and acknowledged with some of the events going on there could be short-term setbacks."

However, the long-term outlook remains positive, according to Null.

"I think everyone still believes U.S products in China have a good future," he said. "The Chinese need these products. The per capita income in China is rising, which will make protein such as beef and pork more appealing to Chinese consumers. I think everyone believes we get past these bumps in the road and our products will continue to grow in popularity in China, and certainly Branstad articulated that."

Prestage plans to export about 30 percent of its pork products. Their top export markets are Mexico, Japan and China.

"China is a key part of our export strategy," Null said.

His meetings with potential customers in China have gone well.

"We were very encouraged with the demand from Chinese customers for our product and that's why I think these pending tariffs are so disappointing to us, is that there is a very strong demand for this product," he said. "U.S. pork is very well-received. It's thought of as safe and that's becoming more and more important in China, is a safe food supply."

He added, "We are positioned long-term to do very well in that market. We just need to get past this current road block."

In particular, Prestage plans to export products called offals, which are in higher demand in countries like China. Offals include pig parts such as intestines, feet and neck bones.

"It's the less desirable cuts that Americans don't eat as many of, so certainly China is an important market for those kinds of products," he said. "But as the Chinese has had a growing middle class, they are also beginning to import muscle meats. Pork loins, bellies and things like that. They help increase value for those cuts for packers and farmers as well."

Null said other Asian countries are in the mix as potential business partners.

"Today, with tariffs occurring in China, we would possibly look at other Asian countries for substitutes for some of those products, such as South Korea and Taiwan," he said.

Much of the fallout from the tariffs will have to do with how they are implemented.

"Farmers in Iowa and the meat packing plants in Iowa definitely will suffer if the price of our goods become less competitive with those out of Europe or those out of Asia," Null said. "That's exactly what this tariff does to us. How long it lasts will be important and exactly how China ends up implementing it will be important and we don't know all of those things yet."

What is certain is that the tariffs won't impact the company's plans in Eagle Grove, he said.

Inside Prestage's 700,000-square-foot plant, 1,050 workers will be employed in year one.

The plant will be capable of processing 10,000 hogs per shift. About 600 million pounds of pork will be processed annually.

In preparation of the plant's opening, Eagle Grove Elementary School is adding on to the north side of its building and the city of Eagle Grove recently announced a substantial housing addition to be located northwest of that school.

A hotel and events center is being built a few miles north of Prestage. An estimated $25 million wastewater facility is being constructed near Eagle Grove's existing wasetwater plant, in the 1300 block of Southwest Ninth Street.

About 400 construction workers are onsite now as work continues on the pork plant.

Prestage is scheduled to begin operations in November.

 
 

 

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