China importing more pigmeat since African swine flu crisis
Over the last few months, the conversation on Irish pig farms has revolved around China and notably the spread of African swine fever.
The interest is not from a humanitarian perspective, but rather a more mercenary (“business is business”) focus on what it’ll do to the current accounts of Irish pig farmers.
Hopefully, this article may provide a useful update on the Chinese situation.
The Irish pig price hit the lofty highs of 1.82/kg during 2016 as a result of China importing nearly 2m tonnes of pigmeat. Unfortunately the good times didn’t last, and our pig price reduced in the intervening two years to a recent price of €1.40/kg. This was due to China reducing the volume of their European imports and the European sow herd increasing slaughterings.
The Irish exports to China (Jan-Sept) illustrate the trend.
The downward trend in Chinese pigmeat imports was due to a relative stabilisation in the Chinese herd size, and a weakening economy.
However, the tide is turning on declining imports since African swine fever (ASF) was found in the Chinese pig herd in August 2018. To combat the disease, Chinese veterinary authorities have instigated a massive cull of pig herds.
Anecdotal reports in Henan (one of the large pig producing provinces) expect a 25% decrease in pig production even though there have been only two official cases of ASF in this region. This reflects the recently released Chinese December pig census which reports a decrease of 9.6% in the sow herd during 2018.
To put this into context this is a decrease of 4.5m sows, the combined sow herd of Germany and Spain eliminated in one year. However the extent of the crisis is hidden within the annual stats.
The sow herd reduced by more than 600,000 sows in December 2018, which equates to the total Irish and UK sow herd gone in one month.
Unfortunately, due to the level of culling currently under way, there is a surplus of pigmeat in China which is driving the local price downwards. The current national Chinese pig price is 14 Chinese Yuan Renminbi per kg (€1.82/kg) but, between provinces, the pig price ranges from 8-20 Cny/kg (€1.01-2.61) depending on the level of culling and restrictions on pigmeat supply.
The Chinese pig industry is expecting the reduction in the sow herd supply to start impacting on the Chinese market after the Chinese New year (March onwards) but they feel that due to the level of chilled/frozen pork in storage, it may be the end of the second quarter before there is a significant hike in prices and pigmeat imports.
It’s worth remembering that in 2016 the national Chinese pig price hit a record 21 Cny/kg (€2.73/kg), and some market observers believe this will be achieved again within the next 12 months.
So who will they phone for these imports, Trump or Tusk? The total 2018 global pigmeat exports (Jan-Oct18) for the US (2m tonnes ) and EU (3.2mt) showed an increase of 1.8% and 1% respectively.
However, when the latest export figures to China are examined (October 2018), the EU exported 126,000 tonnes, and the only exported 11,782 tonnes, due to the China-US trade war.
The bite of this trade war can be seen in the monthly decline of US pigmeat exports to China from April 2018 (65,000 tonnes)to October (11,782 tonnes). If this trade war continues, then the market indicates that the Chinese will have the EU’s number on speed dial rather than the US.
The expert opinion on the current ASF outbreak is that it will take years to control rather than months, therefore any effect on the market will be sustained.
The large level of sow culling will soon begin to impact the Chinese supply of pigmeat; however, this will be temporarily eased by the volume of stored pork. Chinese and international observers, including the Smithfield CEO, expect a significant price rise beginning in quarter two and continuing into the last two quarters and into 2020.
In conclusion, the effect of ASF in China dictates that the level of Chinese pigmeat imports will increase dramatically in 2019, the only unknown is when the starter’s gun will sound.
