Do Pork Imports to China Reflect Market Needs or Politics?

It’s hard to say how the current trade truce between the U.S. and China will impact pork trade for the next few months. Chenjun Pan, senior analyst with RaboResearch, predicts some U.S. pork imports into China, but says there is uncertainty around how much will be imported, due to weak demand.

China agreed to import a substantial amount of U.S. products from Dec. 1, 2018 to March 1, 2019. Prior to 2018’s tariff troubles, pork was the second-largest U.S. agricultural export product to China. Now, with the African swine fever (ASF) situation in China and the approaching Spring Festival, many expect pork to be one of the major agricultural products shipped from the U.S. to China during the truce. However, the size of these shipments is in question because of a weakening Chinese demand for pork.

Prices are staying high in the southern part of the country due to a strong consumer preference for fresh meat rather than frozen meat. Frozen meat can be supplied from the North at present, so imported pork, which is frozen, cannot meet the market needs, Pan says.

Currently northern China is experiencing an oversupply of live hogs which cannot be transported, so these have to be slaughtered in the region. The high storage levels are expected to take a few more months to lower, meaning limited additional imports will be needed before the end of the 90-day truce.

“Additional imports from the U.S. are possible during the trade truce, but they will reflect political rather than market needs,” Pan says.

To date, nearly 100 cases of ASF have been reported in China with no sign of the disease spread slowing down, despite government measures. Because the Chinese hog industry relies on the transportation of live hogs from north to south, the transport ban hit the industry harder than the disease itself, she says.

“The price difference between northern and southern China has been widening as a result of the uneven distribution of hogs and slaughtering capacity, as there is surplus in the north and a deficit in the south,” she adds. “Pork prices in some northern and northeast provinces have been lower than production costs for months, while prices in some southern provinces have increased by 50% since the ban on live hog transportation.”

Piglet prices have dropped by 20% in northern China between early August and the end of November. This is a sign that replenishment is slow at the moment, as piglets cannot be moved around due to the ban on live hog transportation.

Pan expects China will see a big drop in pork production in 2019, along with a drop in pork consumption. 

“How quickly and majorly production and consumption will drop is not certain,” Pan says. “It is believed that very few farms are liquidating sows at the moment, as the commonly shared view is that next year will see supply shortages and rising pork prices. So all the farms, as long as they remain financially viable, are trying every possible means to keep their sow herds.”

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