China’s soaring pork exports ride to rescue in 2016

China was a strong importer of pork in 2016, helping to shore up producers’ incomes in Canada and United States.

Last week, Ed White reported on how the North American hog industry dodged a bullet in the fourth quarter of 2016.

The industry had forecast that the number of market-ready hogs in the U.S. would peak in the fourth quarter and threaten to exceed the capacity of American hog slaughter plants to process them.

Producers used market tools to manage their price risk and sold some hogs early to spread out the numbers, while hog plants were able to process more animals than the industry expected.

However, that produced a tremendous amount of pork, about 6.65 million pounds in the fourth quarter in the U.S., up three percent from the same quarter the previous year.

For the year, U.S. pork production hit 11.31 million tonnes, up 1.8 percent.

Canadian pork production in 2016 rose about two percent.

Those increased volumes hammered hog prices in the summer and fall before a surprisingly robust recovery this winter.

However, the impact on prices would have been much worse if not for the ability of pork processers to increase their exports.

U.S. pork exports hit a record high 2.31 million tonnes, up eight percent over the previous year.

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Canadian pork exports totalled 1.25 million tonnes and the value was $3.8 billion, up about 11 percent from the previous year. The Canadian Pork Council says more than 70 percent of the industry’s output was exported.

The U.S. and Japan are Canada’s top pork export customers. For the U.S., Mexico and Japan are the top destinations.

However, China is a fast growing customer.

U.S. pork exports to China-Hong Kong rose to 545,000 tonnes, up 61 percent in 2016.

Canadian pork exports to China were actually larger than the U.S. They rose more than 150 percent to about 580,000 tonnes.

Growing sales to China have been particularly important for Canada because we lost access to Russia, formerly a big buyer, as part of the tit for tat trade restrictions imposed over Russia’s annexation of Crimea in Ukraine.

China needed to import more pork last year because its hog industry started going through a major reorganization in 2014-15.

To address manure pollution, the government imposed new policies to move small, traditional hog operations out of highly populated regions and into areas with lower populations.

The government also wants hog production to consolidate into large operations using modern production techniques.

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In a way, the hog industry reorganization is just part of an epic reorganization of agriculture in the country to put it on a more modern, market-oriented and sustainable basis.

The transition in the hog industry led to the culling of about 15 million sows over two years. As well, major disease outbreaks occurred during the same period,

This resulted in very tight supply of market hogs by the start of 2016 and soaring pork prices in a nation that consumes almost half the world’s pork production. Indeed, on a per person basis, the Chinese are the biggest consumers of pork in the world, at about 41 kilograms per capita versus 25 kg for Canadians.

The high prices caused pork consumption in China to fall 1.4 percent last year, according to a report by CSEA China.

To address the shortage, China imported more, not only from Canada and the U.S. but also from Europe.

Analysts generally believe Chinese sow numbers started to recover in 2016 and will continue to rise this year, leading to more hogs on the market and increased domestic pork production.

However, Rabobank, an international agricultural financial institution, forecasts that China will maintain the high level of pork imports this year.

As well, the U.S. Department of Agriculture forecasts that American pork exports to all countries will grow almost four percent.

Let’s hope that these forecasts prove accurate because the amount of meat and poultry produced in North America this year is expected to be dauntingly large.

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