As the world’s largest producer and consumer of pork, significant outbreaks of African Swine Fever (ASF) have caused havoc for China.
It’s estimated that 950,000 pigs – 20% of the national herd – have been culled since the disease was first detected last year. China produces 54 million tonnes of pork per year and the 17-18 million tonnes shortfall expected in 2019 is the same volume produced by the entire European Union.
While the deficit is significant, how China will fill the gap is still relatively unknown. A number of pork producers liquidated stocks when ASF was first detected, freezing large stocks of meat which are currently making up the domestic production shortfall. As these begin to run dry, and with domestic production significantly hampered, China will need to secure protein from other sources.
One option is poultry production, which can be increased quickly and easily, and is comparative with pork in terms of affordability.
As the price of pork rises, China’s poorest residents will likely eat less meat, while wealthy consumers may turn to seafood, beef and lamb products.
Even if domestic production of other animal proteins is maximised, China will still experience a 10 million metric tonne supply deficit. While there have been some imports of pork, to date these haven’t reflected the full scale of the decline in domestic consumption. A short spike in US pork exports this month is likely reflective of the 68-70% import tariffs with some speculating that the presence of ASF could give the United States an upper hand in trade negotiations. Unless the trade war ends, it is unlikely that China will buy significant volumes of pork from the US unless the local impact of ASF is extreme.
While world markets wait to see how the situation plays out, it’s more likely that trade opportunities will benefit suppliers of beef and lamb. In 2018, China became the world’s largest beef market after imports exceeded one million tonnes, and it is also the world’s largest destination of imported sheepmeat.
Both trends started well before the outbreak of ASF, and reflect the growing demand for premium imported meats by wealthy households. Australia has benefitted significantly, with a 49% increase in beef exports to China to 2018 and a 28% increase in sheepmeat exports.
While imported pork and poultry are likely to substitute domestically raised pork, it is expected that the flow-on effects to other protein sources will be felt globally. As back stocks of frozen pork begin to dry up and domestic supply continues to fall, the impact of ASF will start to have benefit China’s import partners.
Given the recent demand increase for beef and sheepmeat, it is likely that these industries will see further gains, especially across lower value cuts and manufacturing product.
Sources: MLA, Capital Press, The Lucas Group