Canadian pork exporters are still feeling the effects of Russia’s embargo on Canadian food.
Fortunately, China is increasing pork imports, helping offset the pain of the embargo.
Canada, the United States and the European Union imposed economic sanctions against Russia when it became involved in the civil conflict in Ukraine in 2014 by invading and occupying Crimea.
Russia retaliated by banning food imports from those countries.
The food sector in Canada that suffered the most was pork, which accounted for almost all of Canada’s food exports to Russia.
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Russia was the fourth largest international customer of Canadian pork by dollar value in 2014 after the U.S., Japan and Europe.
Russia’s imports of 96 million kilograms were valued at $329.8 million, or nine percent of Canada’s pork exports.
That disappeared with the embargo in 2015, and there are no exports to Russia this year.
Canadian exporters in 2015 were able to make up for the loss of Russia with increased shipments to Japan, Mexico and China-Hong Kong.
Pork exports in the first quarter of 2016 are running 11 percent ahead of last year at the same time.
On a tonnage basis, exports are up mostly because of a 350 percent increase in shipments to China.
China was the fourth largest pork importer in last year’s first quarter, after the United States, Japan and Mexico.
Its 16.08 million kilograms accounted for 5.6 percent of Canada’s exports by volume in the quarter.
This year, China is the number two customer and its 72.38 million kg account for 23 percent of Canada’s pork exports.
China’s hog producers went through a major contraction in 2014-15, and now there is a pork shortage in what is the world’s largest pork producer and consumer.
Prices for domestic pork are running higher, and imports have jumped.
The South China Morning Post reports that China’s pork price in April was up 33.5 percent from the previous year. Live hog prices are up 51.5 percent.
China’s Bureau of Statistics estimates that pork production in the first three months of this year is down almost six percent from last year.
Officials are selling government-owned pork stocks to try to moderate the price to the consumer.
As well, the U.S. agricultural attaché in Beijing projects that China will import 1.3 million tonnes of pork in 2016, up 30 percent from last year.
The decline in China’s hog production in the past couple of years was not due to disease. It was an industry restructuring in which small scale producers left the business because of lack of profit, rural migration to cities and government initiatives to try to close small operations in urban areas that caused pollution problems with their manure.
The always informative DimSum.blogspot.ca says the central government has repeatedly tried to push the industry toward larger, more environmentally friendly operations that have better market information to hopefully reduce market fluctuations.
However, a program following the severe outbreak of blue ear disease in the late 2000s resulted in over-expansion that crashed hog prices.
The government strategy this time is again trying to push production away from urban areas into modern barns with efficient production methods and a smaller physical footprint.
For the time being, it is enormously profitable to produce pigs in China during this shortage. A column by Jim Long of Genesus Genetics in April said a 250 pound market hog in China is bringing US$340 per head. Profits should be $120 to $150 per head.
Still, it will take a while for China’s herds to rebuild, and in the meantime, it’s creating a great market opportunity for Canada.
