Production losses from African swine fever (ASF) have eclipsed initial estimates, Rabobank said on Thursday. In 2019, Rabobank expects Chinese pork production losses of 25% to 35%, creating new challenges and opportunities for animal protein exporters.
“African Swine Fever has spread to every province in mainland China and is now affecting an estimated 150-200 million pigs,” said Christine McCracken, RaboResearch animal protein analyst. “The expected 30% loss in pork production is unprecedented. These losses cannot easily be replaced by other proteins like chicken, duck and seafood, nor will larger pork imports be able to fully offset the loss.”
Extreme losses of over 50% are expected in confined areas of China. The disease has also spread to Vietnam, where production losses are projected to exceed 10%. ASF has most recently entered Cambodia and could move further into Southeast Asia, further exacerbating global protein shortfalls.
Rabobank said there’s no question that sizable breeding herd losses will delay the Chinese pork industry’s recovery which could take years. Efforts to rebuild will be further complicated by the risk of recontamination, despite available financial resources.
“The shift in global trade patterns to meet animal protein demand will be highly dynamic,” the report said. “This will create opportunities for those companies with an exportable surplus and access to China and Southeast Asia. It will also create logistical inefficiencies and raise costs through the entire supply chain.”
Endemic ASF in China
ASF now affects an estimated 150 to 200 million pigs. To put this in perspective, the expected 30% loss in pork production is nearly 30% larger than annual U.S. pork production and equivalent to Europe’s annual pork supply.
Rabobank said these losses can’t be easily replaced by other proteins or imports. This will likely cause a supply gap of almost 10 million metric tons in the total 2019 animal protein supply.
“Inaccurate reports of Chinese herd liquidation and an early regional supply imbalance were disruptive to initial price discovery, obscuring the impact of production losses,” Rabobank said. “As the government eased restrictions on the movement of animals (and pork), regional prices converged, but moved higher along with the herd loss. With the full magnitude of herd losses quantified, global protein customers are scrambling to secure long-term protein supplies.”
How Will Chinese Protein Consumption Shift?
Global protein supplies are likely to be redirected to China to satisfy the growing protein deficit. A secular shift towards lower Chinese pork consumption will support increased demand for poultry, beef, seafood, and alternative proteins that will shape global production trends, the report said.
“This unprecedented shift in trade will likely create unexpected product shortfalls in markets previously served by these suppliers, creating short-term market volatility that will ultimately result in higher global protein prices,” Rabobank said.
Restrictions May Complicate Trade Response
Animal protein exporters stand to benefit from the impacts of ASF. The EU, the U.S., and Brazil appear best placed to respond to increased import demand for pork and other animal proteins into China and Southeast Asia, Rabobank said.
ASF is also making its way through Europe and is endemic in some parts, such as the Baltic States and parts of Poland, and Russia.
“The potential for outbreaks to restrict exports from significant pork-producing countries, such as Germany, cannot be ruled out. Such restrictions would complicate the trade response to ASF in China and Southeast Asia,” the statement said.
Although the U.S. is a major pork producer and exporter, current tariffs on U.S. pork exports to China are restricting current trade.
During the National Pork Producers Council’s Spring Legislative Fly-in, a delegation of more than 125 pork producers asked members of Congress to urge the administration to end trade disputes with China that are limiting export opportunities.
“Trade remains our top issue,” said David Herring, NPPC president and a hog farmer from Lillington, N.C.