Inventory levels aren’t expected to reach pre-ASF levels this year, and sow herd quality is likely to be lower than before
Claims out of China that hog production in that country will recover by next year to pre-2018 levels do not pass the smell test, says economic analyst Brett Stuart of Global AgriTrends.
African swine fever forced the culling of an estimated 60 percent of the Chinese herd after an outbreak began there in August 2018. China at that point was home to half the hogs in the world, so those losses constituted 30 percent of the world total, Stuart said during an online session at the Canadian Beef Industry Conference.
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Large corporate hog operations in China are expanding and the country is claiming victory over ASF, said Stuart, but those large operations make up only 12 percent of the country’s production.
“So 88 percent of that production is still on farms of less than 1,000 head. Those small farms share trucking, they share feed mills, they share infrastructure and they continue to battle ASF.
“So while these big farms put out a lot of press releases about how well they’re doing and their success, the reality is China’s not going to get over this anytime soon,” said Stuart.
He provided figures estimating that China is short on pork by about 24 million tonnes and there is no protein source on earth that can fill a shortfall of that size.
Meanwhile, Chinese citizens are eating less pork and paying a lot for it, at about US$3.20 per pound. The cut-out price on U.S. pork now is about 60 cents per lb., said Stuart.
In a market economy, that price situation would lead to increased trade and higher prices for producers in exporting countries, but China is not a market economy and is not stepping in to buy product and fully meet domestic pork demand.
Last spring, China bought 10 percent of U.S. pork production and still buys about five percent of it today, Stuart said.
“China went from one percent of our production to 10 percent of our production in a year. They absorbed nine percent production growth. What happened? The U.S. obviously expanded a few percent more than that and so now we’re sitting here with low prices.”
Hog futures have floundered and producers in the U.S. and Canada are getting out of the business, he said.
“It’s a dire situation.”
Other market watchers agree with Stuart that China’s claims of imminent herd size recovery are overblown. Arlan Suderman, chief commodities economist with StoneX Group, said earlier this month that inventory levels are unlikely to reach pre-ASF levels this year and that sow herd quality is likely to be lower than before.
African swine fever continues to threaten hog production around the globe amid constant effort in North America and parts of Europe to keep it at bay.
Belgium, the only western European country to get the virus, where it affected wild boar, managed to stamp it out but ASF continues to march across Poland and is drawing closer to Germany, a major hog producer. Western Europe has about 25 percent of the global swine herd.
