Coronavirus weighs heavily on beef, pork export markets

RED DEER — Meat-producing countries are focused on shipping more to China but the unexpected consequences of COVID-19 could slow export expectations.

Besides more quarantines and cancelled travel plans due to the new coronavirus, the ongoing threat of African swine fever continues to weigh heavily on the global protein market, said Dave Weaber, vice-president of Beef Analytics for Express Markets Inc. based in Colorado.

China has a 20-million tonne shortage of pork and there are probably not enough containers in the world to ship it there, he told about 600 people attending the Alberta Beef Industry conference held in Red Deer March 4-6.

“It is probably the single largest risk to North American meat production today,” he said.

Probably 65 percent of the Chinese hog population is gone and 80 percent of the world’s pork production is threatened by African swine fever.

However demand for meat is also quelled by COVID-19.

Weaber said about 70 percent of Chinese mom and pop food service companies are out of business in cities under quarantine. People are not travelling and demand is shrinking.

The Chinese have a large inventory of pork in cold storage. However, if a city is under quarantine demand is diminished.

The events are shaking up livestock markets.

April live cattle futures are $10 lower and analysts are wondering if the spring highs have already happened.

“There is a very high likelihood that they are,” he said.

The death loss in the Chinese pork sector is staggering. Countries like the United States were hoping to capitalize on that with record exports of beef, pork and chicken.

“We are not going to fill it with beef or U.S. chicken. The Chinese are going to have to eat less protein and that is going to have big market implications around the world,” Weaber said.

The U.S. produced seven to eight percent more hogs, built on the expectation the pork was going to China. Just under 17 percent of U.S. pork exports made it to Hong Kong and China but progress has been slow. The U.S. will have too much pork this fall and prices will fall in response.

“Prices for pork in China are about three times what they are in the United States. You would think it would create a giant sucking sound of product going over there, but it is not,” he said.

Poultry production is also growing in the U.S. Leg quarter pieces are going up in price and more is starting to go to China. They do not eat much white meat and that leaves a question about future prices for boneless skinless chicken breast.

On the beef side, Australia needs to be watched as it recovers from extended drought and wildfires. About 80,000 properties were damaged.

However, the rains have returned and there has been a 50 percent rally in Australian feeder cattle and replacement prices as producers attempt to restock. However, their challenge is recovering the herd inventory that dropped to a 30-year low.

They will not be exporting as much lean trim and there could be upsets in that part of the market.

Under the Phase One Chinese Deal, the U.S. is allowed to ship beef from cattle of all ages and the ban on beef produced using growth hormones was lifted. The Chinese buy lean trimmings from Australia and the U.S.

“We are going to see 90 percent lean go higher because Australia is going to ship less because of their expansion,” Weaber said.

However, 50 percent lean trim prices are a challenge because that product is blended with lean product.

“Fifty percent lean trim is about a $75 per head hit between now and the spring market. Most of that is already built into the futures market,” he said.

If it goes down in price, it affects the overall price of fed cattle.

About half the customers in the U.S. who buy beef, buy it as ground beef. Ground beef is priced competitively with chicken and pork. Those two items are not going to go up because of oversupply.

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