The spread of African swine fever continues to grow with some analysts suspecting China is downplaying the crisis and about half the sow herd there has been lost.
“We still to this day do not know how bad it really is,” said Brett Stuart of Global AgriTrends, who provides market advice to the Canadian and U.S. livestock industries and makes frequent trips to China to gather market intelligence.
The hard-to-kill virus has threatened 75 percent of the world’s hogs in Europe and Asia, he told the Alberta Pork annual meeting held in Calgary Nov. 21.
It has spread throughout China, Vietnam, the Philippines and South Korea. Cases have been found in Belgium and Poland.
Germany is under considerable threat. It has about 17 percent of the Chinese pork market and 20 percent goes to South Korea but if one case is found, that business would be lost. The latest case found in Poland was 80 kilometres from the German border.
Wild boar carry the disease and are a growing pest throughout Europe because they roam through fields and come in contact with domestic pigs, said Manfred Kern, managing director of Agriexcellence in Germany.
“If we have that we are out of the business in the global scenario. If we are blocked out who can close the gap?” he said at the pork meeting.
Fearing the threat, Denmark is building a 70-kilometre-long fence along its border with Germany to protect its pork business.
The losses in China are starting to affect global markets, said Stuart.
About 220 million hogs and 22 million sows have died and the result is high profits for the survivors and food inflation in China.
Hog profits are above $300 per head.
The Chinese eat about 80 kg of pork per capita but the markets are empty. The government released 30,000 tonnes of frozen pork from storage earlier this fall. They have probably released more but that was not nearly enough to fill store shelves.
Consequently, the Chinese consumer faces a 150 percent annual inflation on pork. Beef prices are up 23 percent and poultry is up 33 percent since January. Prices could go even higher for Chinese New Year.
A state owned enterprise is managing to book imported pork into the future. Prices are being held at a reasonable level but the Chinese are outbidding other prominent buyers competing for a limited supply of about eight million tonnes valued at $21.3 billion.
“They can now outbid Japan for pork and that should be terrifying for the Japanese,” Stuart said.
“China now has the ability to outbid everyone. They are a pork magnet,” he said.
Market intelligence suggests the Chinese are attempting to rebuild but it could take years to find enough breeding stock and construct new, biosecure barns.
“The world is not set up to replace that much breeding stock. It will take years,” he said.
They may rebuild 70 percent of their infrastructure in 10 years but that would mean they still need to import about 30 percent of their pork or 16 million tonnes.
China has approved Brazil, Ireland, the United Kingdom and Slovenia for export but the gap is too big to fill.
The United States, Canada and Brazil would have to double production but that is also unlikely.
“We cannot get the permits for six million sows in the U.S.,” he said.
Brazil is well suited to expand because it has good interest rates, access to China, building permits and labour. Canada and the U.S. have the potential to expand but they want to see the money first.
Further, there is an over supply of pork in the U.S. and prices are poor. Packing plants struggle to take what is offered and hope to export the surplus.
“The only way China is affecting us is pulling that demand up. The reality is we are way too heavy on hogs,” he said.
Canada was shut out of the Chinese market since June over false import documentation. The border reopened in November.
About 30,000 tonnes of Canadian pork was going to China before and bids are starting again.
“Chinese bids for Canadian pork are impressive right now,” he said.
Even with a 62 percent tariff, the U.S. is sending a lot of pork to China, which is coming in cheaper than the domestic supply.
In its annual animal protein outlook Rabobank predicts imports will reach record levels in 2020.