Per Reuters, Mexico is set to impose a 20% tariff on U.S. pork and ham imports in response to Trump’s steel and aluminum imports levies. The president of Mexico's leading pork producers association said that it will be a 20% tariff on legs and shoulders, fresh and frozen with bones and without bones.
The news is in line with the announcement from Mexico last week that it would impose duties on pork legs and shoulders from U.S. suppliers, which account for about 90% of the country’s $1.07 billion (£803.6 million) annual imports of the cuts. Since Mexico is the largest buyer of U.S. pork based on volume, the tariff will be a major setback to American meat producers. Notably, Mexico bought $1.5 billion of U.S. pork last year, representing more than 800,000 tons (read: Trade War Tensions Flare Up: Must-Watch ETFs & Stocks).
U.S. pork export threats have added to the woes facing American farmers, who are already struggling with a meat glut and producers, who are already facing a 25% duty on pork exports to China. This is especially true, as global pork production is expected to grow 2% this year largely driven by an increase in China production, which accounts for about 48% of total global output.
As such, it could result in unseen consequences in the pork industry. Growing trade worries have pushed pork prices lower in recent weeks, resulting in losses of about $560 million for Iowa producers.
That said, we present some ETFs & stocks that could be the worst hit should Mexico follow through its threat on American hams and pork shoulders.
IQ Global Resources ETF (GRES - Free Report)
This fund seeks to offer exposure to global companies that operate in commodity-specific market segments and whose equities are traded in developed markets including the United States. It follows the IQ Global Resources Index and holds 239 stocks in its basket. The product has about 15% allocation to the livestock market. It has AUM of $273.2 million and charges 77 bps in annual fees.
VanEck Vectors Agribusiness ETF (MOO - Free Report)
This fund is by far the most popular choice in the space with AUM of about $874.7 million. It tracks the MVIS Global Agribusiness Index and charges 54 bps in annual fees. In total, the fund holds 57 securities in its basket with about 30% exposure to food products including meat producers (read: Profit from the Commodities Rally with These ETFs).
iPath Series B Bloomberg Livestock Subindex Total Return ETN
The ETN provides exposure to the Bloomberg Livestock Subindex Total Return, which reflects the returns that are potentially available through an unleveraged investment in the futures contracts on livestock commodities. It has accumulated $5.1 million in its asset base while charges 45 bps in annual fees.
Tyson Foods Inc. (TSN - Free Report)
It is the world's largest processor and marketer of chicken, beef and pork, the second-largest food company in the Fortune 500 and a member of the S&P 500. The stock witnessed negative revision of eight cents for the year (ending September 2018) over the past 30 days but represents strong year-over-year earnings growth of 213.54%. It has a Zacks Rank #3 (Hold) and a VGM Score of B.
Pilgrim's Pride Corporation (PPC - Free Report)
It is one of the largest chicken companies in the United States, Mexico and Puerto Rico. The stock saw positive earnings estimate revision of four cents or this year over the past 30 days with an expected growth rate of 5.19%. It has a solid Zacks Rank #2 (Buy) and a VGM Score of B. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Sanderson Farms Inc. (SAFM - Free Report)
It is engaged in the production, processing, marketing and distribution of fresh, frozen and minimally prepared chicken. The stock saw negative earnings estimate revision of $1.68 for the year (ending October 2018) in a month with an expected earnings decline of 38.62%. Sanderson Farms has a Zacks Rank #5 (Strong Sell) and a VGM Score of B.
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