Pork exports could soar but feed markets could plummet as African swine fever threatens to slash country’s herd
The hog crisis in China might eventually be good for some of Canada’s agricultural exports and bad for others but so far it has had little impact.
African swine fever was first detected in China in Liaoning province on Aug. 3, 2018.
Since then there have been 105 confirmed outbreaks of the deadly disease in 25 provinces/autonomous regions/municipalities, according to the Food and Agriculture Organization of the United Nations.
The government has culled more than 950,000 pigs in attempts to halt further spread of the disease.
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But the reduction in China’s pig herd will be much larger than that, according to Pan Chenjun, a senior analyst with Rabobank.
“The numbers culled is just a small part,” she told Reuters.
Farmers are losing money at today’s prices and are having trouble getting their hogs to market due to transport bans.
Pan told Reuters that China’s pig herd could be reduced by 20 percent in 2019 as small farmers liquidate their herds and large farmers slow the restocking and expansion of their farms.
China had 428 million hogs as of the end of 2018, according to the China National Bureau of Statistics.
A 20 percent reduction would be 86 million hogs. To put that in perspective, Canada had 14 million hogs as of mid-2018.
Losing that many hogs in China could have massive implications for global livestock and feed grain markets.
But it hasn’t affected Canadian pork exports to China yet.
“I don’t see any improvement compared with last year,” said Jorge Correa, vice-president of market access with the Canadian Meat Council.
He thinks that might be because exports to Japan and Mexico are on the rise.
“Those are more lucrative markets for Canada than China,” said Correa.
Mexico is much closer and Canada is temporarily facing far lower tariffs than the United States into that market.
Correa said China could eventually become a big opportunity for Canadian exports if the Rabobank estimate proves true.
The country is 95 percent self-sufficient in supplying pork to its citizens, with the other five percent coming from imports. That number would increase dramatically if it lost 86 million hogs.
China has traditionally bought cheaper cuts of meat, such as hocks, heads and tails.
“However, this culture is changing with time and they’re starting to buy more expensive cuts,” said Correa.
Canada, the U.S. and Australia are the only countries that can export chilled meat into China.
Correa said Canada used to have a great trading relationship with China but things have soured since Canada detained a Huawei executive for possible extradition to the U.S.
The other side of the African swine fever coin is what it will do to feed grain demand.
Brian Clancey, editor of the Stat Publishing newsletter, said the disease could hurt soaring feed pea demand in China.
Canada shipped 1.97 million tonnes of peas to China through the first 11 months of the 2018 calendar year. That represents two-thirds of total pea exports for that period.
Clancey estimates about one million tonnes of that was feed peas destined for China’s hog sector as a replacement for soybean meal. A 25 percent tariff on U.S. soybeans has Chinese hog producers looking for alternative feed ingredients.
African swine fever in combination with increased Chinese soybean production and a reduction of protein in hog diets could limit demand for feed peas.
Pea prices have also risen quite a bit since the fall of 2018, which could also reduce demand for the protein ingredient.
And then there is the trade war with China. China appears eager to thaw tensions by agreeing to purchase large volumes of U.S. soybeans.
All those factors could reduce pea exports to China in 2019 but Clancey isn’t overly concerned. He thinks the pea supply and demand situation will be okay in 2019-20.
He has been following the pea trade his entire career and the crop has an uncanny knack of finding new demand, unlike lentils and some special crops.
And the nice thing about growing the crop is the feed market always sets a floor price.
“When peas get cheap the livestock sector all over the world will chew them up in a jiff,” said Clancey.
Dustin Gabor, lead analyst with Grain Shark, said there is a still a big market for food peas in China.
“It’s not only a feed substitute for soy. The new protein trend for peas overall is helping that market,” he said.
