African Swine Fever, trade disputes to disrupt global pork market
October 23, 2018
DENVER ) — China, both the top producer and consumer of pork, has been stricken with African Swine Fever in 10 provinces all while being involved in a deepening trade war with the U.S. The Chinese have taken action, by culling almost 50,000 hogs in an effort to prevent spreading the virus, a small fraction of Chinese hog production. According to a new report from CoBank's Knowledge Exchange Division, the threat of a more widespread virus and disturbance in the world's pork supply chain due to trade disruptions is expected to drive prices higher with potential benefits for the global protein sector.
China's hog prices have climbed 25 percent since July and the escalating trade dispute with the U.S. has limited China's import options. In addition to the import restrictions, CoBank estimates that more than 70 percent of China's hog production is being affected by the larger quarantine and hog movement restrictions in China.
"African Swine Fever in China may be the event that helps bring U.S. pork supply and demand back into balance for years to come," said Will Sawyer, lead animal protein economist with CoBank's Knowledge Exchange Division.
In the past, when pork prices have increased, the Chinese consumer has switched to chicken as their main source of animal protein. However, since 2014, China's poultry sector has struggled with negative publicity.
"In 2016, when hog prices climbed to all-time highs, chicken prices barely budged," Sawyer said. "Consumer switching is always a possibility during price shocks, but with human fatalities and other food safety risks in China, we think consumers will continue to demand pork, which will be met by imports rather than domestic Chinese production."
However, these increased imports will come at increased cost as the Chinese source pork from the European Union and Canada, Sawyer said.
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"The real opportunity here is for U.S. producers is to capitalize on reduced global competition in pork," said Sawyer. "Pork producers could potentially climb back to breakeven and maybe to positive territory next year, but it will largely depend on how the ASF story unfolds in China."
To read the full report, visit cobank.com.