Betting the Farm on Chinese Pork Demand

African swine fever continues to spread in China, with the number of farms reporting outbreaks surging well over 70 at this point in time. While the country is doing what it can to limit the spread of the disease – banning pig and pork movement from provinces with positive herds and banning pig movements from the provinces that border them – it will likely not stop the spread of this disease. 

The structure of the Chinese pork sector with small farms that have little or no biosecurity, in addition to the density of production and the wild pig population, will make the control extremely difficult. The transportation system and difficulty of monitoring the disease on trucks will add to the challenges.

The sheer number of farms, particularly backyard farms, makes reporting outbreaks difficult. Most people agree that there are many more farms that have contracted the disease than are being reported. One would believe that with all the diseases endemic in the Chinese swine herd, this will be yet another disease for the Chinese producer to manage.

Where will all the meat go?
The difficulty we have in the U.S. sector is gauging what happens to demand for imported pork in China. It will likely increase dramatically. But even though there is no risk to humans, and the Chinese government has been informing the public of this, I would expect some deterioration in pork demand in China. The public will be skeptical, as they have in the past. It doesn’t help that we are in the middle of this trade situation with China, which makes the U.S. the market of last resort with the current tariffs in place.

Much of this will play out over the next 6 to 12 months. And in the meantime, we have a growing supply of meat in the U.S. that will need to go somewhere. 

According to the latest USDA Supply Projections, pork production in this country is expected to be up 2.8% in 2018 and another 5.3% in 2019. To export all the additional pork produced in 2019, exports will have to grow by 23%. That is a tall order. In addition, beef production will be up by 2.8% in 2018 and another 3.3% in 2019. Beef exports will have to increase by 28% to export all the additional beef.

Monumental marketing decisions
There are some options that make some sense. The marketplace is giving us the opportunity to lay off some of the risk in 2019. In all the years I’ve been involved in the swine industry, it is about the most difficult time I remember to make those marketing decisions.

Weigh the outlook for great export demand stemming from global ASF spread with the backdrop of an expected higher production of pork, beef and chicken. From my perspective, it comes down to whether you can -- and are willing to -- bet the farm on the export markets in the near term. 

Related Links:

Keep ASF Vaccine News in Perspective

Will U.S. Pork Benefit from China’s ASF-Induced Supply Issues?

Pork Export Value Still Under Pressure

 
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