2021 Change Drivers: African Swine Fever, COVID-19 Top the List

African swine fever (ASF) and COVID-19 pressures continue to lead the pack as the major change drivers in the 2021 global pork market. 

“While ASF continues to impact pork production in Asia and Europe, as well as global trade flows, COVID-19 continues to impact the whole supply chain, though demand is expected to rebound in most regions in 2021 due to economic recovery,” the RaboResearch team at Rabobank said in its Pork Quarterly report.

Here’s a look at the key issues RaboRank analysts are keeping a close watch on in the year ahead.

ASF Concerns Linger in Global Markets
Throughout 2020, China and Vietnam were constantly hit by ASF outbreaks and continue to face challenges with this deadly virus of pigs. Unfortunately, 2021 isn’t off to a better start. This winter, new strains of the ASF virus have been discovered in China, slowing the restocking pace and causing prices to stay high. However, Rabobank notes the herd loss is considerably smaller and culling of whole farm herds is rare. 

“Large-scale farms have gained experience in managing the disease, diagnosing ASF as early as possible and culling only a small number of hogs as a result,” Rabobank analysts said. “While ASF remains the top threat for the country’s farming sector, restocking will proceed rapidly in 2021 in our view, driven by large-scale players.”

Meanwhile in Vietnam, the total number of outbreaks reported is over 1,330 cases, highlighting the seriousness of the situation. Similar to China, the impact of the virus has declined in recent months due to large-sized farms implementing good biosecurity to manage disease risks better. 

“The Vietnamese government is speeding up the assessment of ASF vaccines and set the goal to move to commercial production, likely in Q2 2021,” Rabobank analysts said. “The experimental research has had successful results. If the commercial use can be successful too, this will become a game changer, increasing the restocking speed and shortening the herd recovery time.”

Germany’s ASF outbreaks are currently located in four distinct core zones in the states of Brandenburg and Saxony. Experts believe the risk of the virus spreading to commercial farms remains low due to tight biosecurity measures at pig farms and low commercial farm density in these parts of the country. Still, Rabobank reports that disease pressures from western Poland continues as the numbers rise in cases of ASF in wild boars. 

Germany has been able to redirect its export flows, with only a minor decline in total exports in November 2020, according to the report. ASF challenges in eastern European countries and higher pig carcass prices offer opportunities for Germany to increase its exports. However, Rabobank notes that margins are probably lower in these countries due to lower retail prices and a more fragmented market structure which makes marketing larger volumes more difficult.

“We expect continuing downward pressure on German and EU pig prices in Q1 2021, as trade remains restricted and backlogs at German pig farms are still significant, creating ample supply in the EU,” Rabobank said. “German pig farmers are reportedly waiting to restock their farms to reduce supply.”

COVID-19: The Impact on the Pork Supply Chain Continues
Despite advances in the rollout of vaccines, COVID-19 continues to affect activities in most markets today, Rabobank said. And that isn’t going to change anytime soon. Rabobank shared these four issues associated with COVID-19 that will affect pork production and consumption through 2021 and in some cases, beyond.

•    Working from home is here to stay. Although some office workers may return to offices during 2021, Rabobank said it anticipates more people working from home on a permanent basis in the future. This will result in a shift in some foodservice channels such as lunches, snacks and meals on the go.

•    The pivot away from traditional foodservice channels will continue. Although a gradual return of foodservice is expected this year, Rabobank notes that companies that previously worked in these channels are shifting structurally and adopting more agile ways of working designed to capitalize on emerging areas of growth, which has implications for the responsiveness required of their supply chains.

•    Trust will take time to rebuild. Rabobank reports that trust in animal protein supply chains has been challenged by workers at processing plants, by regulators over the control of COVID-19 outbreaks at plants and by consumers over how COVID-19’s impacts have been managed.

•    Foodservice will not return to “normal” until 2022 or 2023. Foodservice restrictions will hopefully continue to be lifted during 2021, but total revenues are still expected to be down on 2019 levels during 2021, the report said. Quick-service restaurants are almost back to normal, but restaurants, hotels and catering are expected to be slowest to generate 2019-level revenues.

Exports and feed costs add additional pressures
In addition to ASF and COVID-19, Rabobank points out that global pork trade will continue to face big swings as China is expected to lower 2021 imports and the case for regionalization in the EU remains fragile. North American pork exports will be historically large in 2021 but will likely not surpass 2020 volumes as China moves toward self-sufficiency.

Feed costs are also putting pressure on margins for hog fattening throughout 2021, the report said. Prices of the main feed commodities will decline from peak levels this quarter but will remain well above last year’s level. 

“While the influence of surging prices on regional feed costs will depend on the feed mixtures used, this will generally add downward pressure on hog farming margins and may force some smaller farmers to exit the market,” Rabobank reports. “Strong prices for corn and soybeans may also trigger substitution of other grains, pushing up the prices of all grains. Food inflation will be one of the key issues on government agendas across the globe in 2021.”

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