The Lunar New Year is coming up, and 2019 is the year of the Pig. In Chinese culture, pigs are a symbol of wealth and a sign of good fortune, and Chinese pig producers could sure use a little good fortune right now, as they struggle to control the spread of Asian Swine Flu (ASF). US pork producers could use a little good fortune too- maybe we can jump in with our pork exports and save the day.
Unfortunately, we’ll probably need to settle this pesky trade war first.
Asian Swine Flu Spreading
The South China Morning Post reported that pork prices in China are anticipated to rise sometime after the start of the Lunar New Year due to the rising numbers of cases of Asian Swine Flu (ASF). As of this week, the ASF outbreak has reached 24 of 31 provinces and has forced the culling of over 900,000 animals. ASF is deadly to swine, but is not dangerous for humans. Farmers there have been urged to restock quickly to help mitigate the anticipated price increases.
The Lunar New Year holiday is celebrated in early February and meat is widely consumed during this time. Tang Ke, an official from the Ministry of Agriculture and Rural Affairs in China has said that the ASF outbreaks had not yet hit national pork prices, and that their supplies were currently ‘sufficient.’ However, as the country is battling to get ASF under control, some live pig prices are at loss-making levels- especially for small farmers.
Chinese Pig Stocks Lower This Year
Chinese pig stocks were 5% lower this December as compared to last year at the same time. Breeding sows were down 8%. Tang added,
“For three consecutive months the drop was more than the 5 per cent warning level, meaning that in the second half of this year, the number of live pigs to reach the market will be lower and the likelihood of pig prices rising is very big,” he said.
For now, live pig prices remain low. Pork prices also remain low, and continued declining in the last week by 0.9 per cent to 23.55 yuan per kg, and are down almost 8% compared to last year.
“The volumes of pork traded at monitored farmers’ markets has dropped by 14.4 per cent, consumer demand is weakening,” Tang said.
Untapped Market?
Urban C. Lehner, Editor Emeritus at DTNPF, argues that it’s important for the US to see the potential in exporting more meat to China. We focus almost entirely on whether or not China will again continue to buy our soybeans. At the DTN Ag Summit in Chicago in December, Lehner heard a talk given by Chenjun Pan, an Ag analyst with Rabobank in Hong Kong. She spoke of the potential to expand US meat exports to China.
Most of China’s beef imports come from Brazil and Uruguay. Brazil provides most of their chicken imports. The EU supplies 70% of China’s pork imports- and this is really important, because 60% of the meat the Chinese eat is pork. Why isn’t the US more in on this game?
Several reasons. The Chinese don’t want to eat meat that’s been treated with growth stimulants- even if they are considered safe. US beef had been locked out of the market because of BSE, and chickens because of avian influenza. So it’s not necessarily the trade war that’s keeping US meat out of China.
Now, China may need our meat as they are struggling to get a handle on ASF. If China can hold the decline in pork production at 2-4%, the US might be able to make up for the supply that China needs. If the Chinese pork production drops even more, the demand for US pork could increase significantly. It’s also worth noting that the EU has had some cases of ASF, so China may be looking to other countries for pork supply. Things could be looking up for US pork.
Chinese Demand for Meat Declining
On the flip side, Pan also pointed out that it appears that China is experiencing a slowdown in the demand for meat. Current growth rates for pork, poultry and beef is 2% and dropping. Chinese tastes are changing. More people are eating chicken. Fewer are eating beef. They are more willing than most consumers to purchase food that is ‘organic’ and ‘natural.’
Lehner argues that if the US is going to make any headway in the meat departments of China, we first need to understand the markets.
US Pork Isn’t Needed- Yet
All of this information isn’t very helpful though, until we resolve the trade disputes with China. Jennifer Shike of Pork Business says it’s difficult to know how the trade war with China will impact pork trade. Before the trade war, pork was our second-largest agricultural export to China. With ASF hitting and the Lunar New Year celebrations, many have anticipated US pork exports to China to increase.
Things don’t appear to be at critical levels right now. Pan notes Chinese consumer preference.
Prices are staying high in the southern part of the country due to a strong consumer preference for fresh meat rather than frozen meat. Frozen meat can be supplied from the North at present, so imported pork, which is frozen, cannot meet the market needs, Pan says.
Currently northern China is experiencing an oversupply of live hogs which cannot be transported, so these have to be slaughtered in the region. The high storage levels are expected to take a few more months to lower, meaning limited additional imports will be needed before the end of the 90-day truce.
It appears that China doesn’t need our pork yet, and that any additional US imports are mostly political in origin. Few farms in China are liquidating sows right now in anticipation of lower supply and rising prices.
Here’s to hoping that 2019- the year of the pig- provides US with wealth and good fortune.
