The News & What it Means – More Pork Export Opportunities May Lie Ahead

By John DePutter & Dave Milne – October 30, 2018

 

The news:

“Outbreaks of a highly contagious swine disease could roil pork shipments worldwide next year.”

– Reuters, Oct. 26, 2018

 

What it means:

Export opportunity for some pork-producing countries, including Canada.

 

Of course, the highly contagious swine disease being referenced here is African Swine Fever (ASF), which results in almost certain death for any pig unlucky enough to contract it. Harmless to humans, ASF can be spread through direct contact with infected animals and contaminated feed. There is no vaccine against ASF, thus limiting the options for disease control.

 

Currently, ASF is carving a path through China, where the official number of outbreaks is reported at 53, involving over 111,000 pigs. Both of those numbers can be debated, with analysts suggesting the problem in China is probably more widespread than the government is admitting. One of the latest discoveries of the disease was in Yunnan province, which borders Vietnam, Laos and Myanmar, potentially increasing the risk of infection for other countries in South East Asia.

 

ASF a potential powder keg

So far at least, ASF hasn’t put a major dent in pork production in China, home to about 700 million pigs – half the global population.

 

But given that pork accounts for two-thirds of China’s meat consumption and is considered such an important food staple the government maintains a pork reserve, the disease is potential powder keg. Indeed, if ASF were to devastate China’s pork industry, there may not be enough supply elsewhere in the world to fill the gap.

 

When considering China’s possible import needs, it’s important to remember that approximately 96% of domestic demand is now filled by local production. That leaves China’s most common foreign pork suppliers – the EU, the US and Canada – to make up the remaining 4%. From these numbers, it’s easy to see any significant hiccup in China’s pork production machine could have massive repercussions on the world pork trade.

 

China is obviously working hard to limit the spread of ASF but the sheer number of small backyard pork operations in the Chinese countryside makes containment a monumental task.

 

China’s imports, prices rising

Meanwhile, it appears imports are already increasing. According to a report from Rabobank, China’s pork imports jumped 10% year-over-year in August. Hog prices in China are rising as well, with some values up as much as 25% since July.

 

 

The ongoing trade war between the US and China means China’s duty rate on US pork increased from 12 to 37% in April and from 37 to 62% in July. That has limited US shipments into China, with actual American pork exports to China/Hong Kong down 43% in August alone and down 24% through the first eight months of this year.

 

If ASF in China becomes bad enough and domestic hog prices rise sharply enough, US pork will eventually price itself back into the Chinese market, regardless of the import tariffs. But in the meantime, the market that could open itself up to Canada has the potential to be massive.

 

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