Did news of Germany’s first confirmed case of African swine fever (ASF) throw gasoline on the fire? Len Steiner of Steiner Consulting Group thinks so.
According to the Daily Livestock Report, U.S. lean hog futures opened limit up on Thursday due to a combination of higher cash prices paid in the spot market on Wednesday, robust cutout values and news of ASF confirmed in Germany.
South Korea has already reported it will suspend imports of pork from Germany, according to Reuters. The U.S. and the European Union both have been encouraging regionalization that would allow trade to continue in areas not affected by a disease outbreak.
“Germany and other EU countries have been pushing hard for this because they have had ASF knocking at their door for quite some time,” Steiner says.
Global Pork Trade
At this time, Steiner does not believe this will have a material impact on pork supplies in Europe. However, if countries that currently buy from Germany decide to suspend trade, it could bolster demand for U.S. pork.
According to the Daily Sabah, German agriculture minister Julia Kloeckner said the German government has been in contact overnight with China. A formal agreement does not exist between the two countries about ASF. From January to April, Germany exported 158,000 tons of pork to China – twice the tonnage from the same period in 2019, according to the Daily Sabah.
The U.S. has become the top pork supplier to China this year, who imported 477,694 metric tons of pork in the first seven months of the year. Imports from the EU accounted for 53% of total Chinese pork imports so far this year, Steiner says. Germany was the second largest supplier of pork to China from the EU.
“Brazil and the U.S. are two countries that could replace German pork supply in China if pork trade is suspended,” Steiner says.
Iowa State University economist Dermot Hayes agrees it could be beneficial to the U.S. if China were to restrict German imports.
However, he says the U.S. may not be able to fill that entire gap. At the height of the COVID-19 crisis last spring, one North Carolina packing plant that was devoted exclusively to carcass meat for China switched back to meeting the need for the U.S. market. Hayes doesn’t believe they will switch back to carcasses again.
“There's a structural reason why we won't be exporting as much, from that plant at least, and it's hard to know if other companies will be able to make up the slack,” Hayes says. “We're almost constrained in terms of how much we're exporting to China right now, and we may not have the product that they need. So it's going to be touch and go as we wait to see how it develops.”
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