China has a protein crisis

Prime Cuts with Steve Kay

You can’t make a silk purse out of a sow’s ear, goes the old Scottish idiom. But you can if it is a Chinese sow. This is because African swine fever (ASF) has reduced China’s sow population by 37 per cent in just the past year. China’s hog losses due to ASF are rapidly mounting and the country faces a critical shortage of pork and other proteins. That is hugely beneficial to the North American beef and pork industries.

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Already the world’s largest pork importer, China is desperately seeking even more pork from numerous countries. They include the U.S., whose pork still faces huge tariffs in China. But China’s pork crisis means it has agreed to grant what it calls limited exemptions on certain U.S. agricultural goods, including soybean and pork imports. South Korea meanwhile joins eight other Asian countries in becoming positive for ASF. This comes after pigs were found positive for ASF near the nation’s border with North Korea, which has been positive for the virus since May.

All this is positive for the Canadian and U.S. livestock sectors. The next U.S.-China trade talks were scheduled to be held in early October, after I wrote this column. The U.S. pork industry in particular will have been hoping for a big reduction in China’s tariffs. Lower tariffs and larger U.S. pork exports to China and Korea will remove more pork from the U.S. market as production ramps up this fall. Canada is already seeing an increase in its beef and pork exports to China. China is also turning more to South America for its beef needs. Today, 22 per cent of China’s beef imports come from Uruguay and 73 per cent of Argentine beef exports in 2019 have gone to China.

China’s hog losses now represent 38.7 per cent of its total hog inventory, with sow numbers down 37.4 per cent, according to figures released September 13 by China’s Ministry of Agriculture. Losses could accelerate, with the hog inventory looking at a 70 per cent loss by year-end, says Australian meat analyst Simon Quilty. He makes several other points. China’s food inflation in August continued to be 10 per cent higher than a year ago, with pork being the biggest driver at 47 per cent higher. China’s piglet prices are now double what they were at the start of the year.

China has also approved more beef plants globally (289) compared to pork plants (246) and poultry plants (95), he says. Brazil is the latest contributor to this, with 25 plants approved in August-September. The emphasis on more global beef suppliers over other proteins should be noted, he says. China’s vice-premier Hu has confirmed a 10 million metric ton shortfall in protein supplies this year and acknowledges the extreme pressure due to the lack of pork that will be felt in the last quarter of 2019 and the first half of 2020. An ASF outbreak in the Philippines puts global producers on notice that nowhere is safe from ASF, says Quilty.

China accounts for approximately 50 per cent of the world’s annual pork production and consumes the vast majority of this production, says analyst Andrew Gottschalk of HedgersEdge.com. Its annual pork exports are minimal. The sharp decline in China’s hog herd equates to a nearly 20 per cent decline in the world’s total hog inventory. This should lead to increased U.S. pork exports as cooler stocks in China are reduced, lending support to the U.S. pork and beef markets. As pork is a staple in the diet, China can ill afford to allow already record-high pork prices to continue their advance, he says.

About the author

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A North American view of the meat industry. Steve Kay is publisher and editor of Cattle Buyers Weekly.

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