China’s import prices have been rising since last year and have even driven up international pork prices.
Analysts expect this to continue this year, but Cesar Urias, market access and government programs management director for Canada Pork International, takes a more nuanced approach.
Urias said those forecasts may have been reasonable last year, when pork exports to China benefited from a local boom because of aggregated demand growth.
However, he said it’s difficult at this point to predict short-term prices because of factors such as local growth of pork and animal protein demand, local expansion of sow and hog operations, the likeliness of prices falling after last month’s Chinese New Year and the growing competition from international pork suppliers.
Urias acknowledged China is probably the driver when setting international market prices because of the premium that Chinese buyers pay for imported pork products. This premium tends to be more significant than prices paid in other markets.
“This is applicable to Canadian pork exports (too),” he said.
Smithfield Foods, an American company that China’s Shuanghui Group acquired in 2013, raises and slaughters pigs in the United States and ships carcasses to China for processing and packaging.
Dermot Hayes, an economics professor with Iowa State University, said he saw pork with the Smithfield Foods label selling for twice what the local Chinese product was bringing.
China’ central government has imposed a duty on all pork and allowed local governments to shut down facilities and kill 10 million sows.
The move is part of a seven-year government effort to reduce pollution by shutting down smaller units located in cities.
“They are finally getting rid of the last of the backyard units,” Hayes said. “However, the pig producers located farthest away from people are making so much money it’s crazy.”
Trade figures provided by Joel Haggard, senior vice-president of the U.S. Meat Export Federation’s Asia Pacific region, show a 108 percent year-on-year increase in Chinese pork imports last year, excluding Hong Kong.
The European Union accounted for 68 percent of this trade, followed by the United States with 13 percent, Canada with 11 percent, Brazil with five percent and Chile with three percent.
In decreasing order of volumes, exporters to China include the U.S., Germany, Spain, Denmark, Canada, the Netherlands, France, Brazil, Chile, the United Kingdom, Ireland, Hungary, Belgium, Romania, Mexico, Slovenia and Italy.
Hayes said the U.S. is lagging behind where it should be in exports to China, and Canada is taking advantage of this.
“Canadian exports are really high right now,” he said.
Urias said this means the Canadian industry should focus on securing sustainable access to China.
“The demand for Canadian pork products is unmistakable, yet disruptions may arise from technical obstacles to trade, as the industry has experienced in recent years.”