Friday, March 29, 2024

Chinese crisis hits pork supply

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The emerging crisis from pork shortages in China might signal a squeeze on pork imports to New Zealand as Chinese importers try to fill the emerging supply gap.
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African swine fever (ASF) has ravaged Chinese pig herds since its discovery in August, having spread to all Chinese provinces, resulting in more than a million pigs being culled. Culling an entire infected herd is the only solution for farmers trying to curb the disease’s spread. There is no vaccine.

The disease now affects 150-200m of the country’s 400m pigs that account for half the global herd.

Rabobank estimates production losses of 25-35% in the world’s largest market for pork, equating to almost 30% more than the entire United States pork production or equivalent to Europe’s annual supply. 

The Chinese shortfall is estimated to be simply too great to be made up from imports.

The US Department of Agriculture has estimated losing half its pigs could push China’s pork prices up by 70%.

New Zealand Pork chairman Eric Roy said there appear to be sensitivities at a Chinese government level around describing just how great the spread of the disease has been.

While NZ red meat officials have been playing up the effect the pork crisis could have on lifting red meat sales, the most immediate impact in China has been on poultry sales as consumers swap pig for chicken in their diets.

The South China Morning Post reported poultry price increases of up to 68% in the past year in a market already tight for supply thanks to a ban on importing poultry from the US and Europe after a bird flu outbreak in 2016.

The Chinese government is putting major emphasis on ASF control, aware of the impact a shortage could have on a populace committed to eating pig.

Pork is integral to the Chinese diet, holding significant cultural and spiritual value, being seen as a symbol of force, prosperity and well-being, particularly this year which is Year of the Pig. 

Organisation for Economic Co-operation and Development data indicates China’s per capita pork consumption at 31kg a year, poultry 12kg, beef 4kg and sheep meat 3kg. 

“They (government) have been downplaying it due to the extent of the spread but the other reason will be because they are heading towards a protein shortage and do not want to create an atmosphere that drives up global prices. 

“If it is as serious as we think it is, it could have a ripple effect globally,” Roy said.

The Chinese protein crisis comes in part because of the poultry shortage and the ASF outbreak being exacerbated by the US-China trade war.

Tariffs of 50-70% were put on US pork imports by the Chinese government as part of a retaliatory move in the trade battle.  

Typically, China only imports 2% of its pork products but the outbreak has already sliced 20% off the country’s domestic production.

“Generally, we know that 2% over or under on supply has a 5% impact on prices in the protein markets. These are loose numbers but to some degree reflect what we might call a standard reaction to supply,” Roy said.

He acknowledged expectations from the red meat sector the issue might increase demand for other products.

“But qualifying just how much that will be, that will be quite hard to do. China is the biggest producer of pigs in the world and the biggest consumer of pork.”

Rabobank has reported Chinese protein importers are scrambling to secure long-term pork supplies.

The Chinese government is supplementing tight supplies by drawing on its national pork reserve of 200,000t, only a fraction of the 41m tonnes consumed every year.

The most likely sources for pork imports will be the European Union, the US, Canada and Brazil. 

Roy said NZ’s production is simply too small to make this country a player in the supply game. NZ has about 100 pork producers with exports worth about $1m a year.

“But there are some products that we don’t have a big market for here in NZ, such as legs, which are usually only popular for ham around Christmas. 

“The issue of greater interest to our growers is the impact of ASF on imported pork to NZ. We cannot compete at present with imported pork products on price and this pork may end up going to China.” 

NZ now imports about 60% of its pork products.

Roy said he is loath to paint too bright a picture of the ASF situation, given it is a disease no-one ever wants to see here.

“It is devastating.

“Pigs have no natural resistance to it. 

“Our industry has good on-farm biosecurity procedures but we are talking to MPI and the minister about the risks from the disease entering through airports.”

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