Europe and Brazil help fill China’s 10m-tonne pork shortfall
China’s pork imports from Brazil and Europe are surging as it attempts to fill a 10m-tonne domestic shortfall of meat this year, caused by the mass pig culls it carried out after African swine fever was diagnosed in its domestic herds last year.
Chinese pork producers began preemptively culling their herds last year to avoid infection, resulting in a boost to meat supply that temporarily kept prices low and damped demand for imports. Since then the virus, which is harmless to humans but deadly to pigs, has been recorded in every province and China’s pig stock has dropped by a third.
Domestic pork prices have nearly doubled since July, reaching Rmb38 per kilogramme, according to official statistics.
With the surge in prices, import demand is back. The value of pork imports grew more than 150 per cent year-on-year in August to Rmb2.5bn ($350m), according to Financial Times calculations based on figures published by China’s state media on Sunday, which showed that pork imports by value jumped 66 per cent year-on-year in the first eight months of the year.
Beijing has imposed a 72 per cent tariff on US pork as part of its trade war with Washington, so China has turned to farmers in Europe and Latin America to step up their supplies. Analysts project that China will import more than 2m tonnes of the meat this year.
“China’s need for pork and protein substitutes will disrupt traditional meat trade flows,” said Ricardo Santin, chief executive of the Brazilian Animal Protein Association. “The sales outlook to China is positive for the entire international market, but is especially valuable for Brazil.”
Gilberto Tomazoni, chief executive of Brazil’s JBS, the world’s largest meatpacker, told investors in August that sales to China had grown by 70 per cent to 80 per cent in the latest quarter from the previous three months.
“I think we are at the beginning of the effects of increased protein demand due to African swine fever,” he said.
In the first half of the year Spain increased the value of its sales to China by 90 per cent to €442m, partly as a result of the rise in prices, said Daniel de Miguel, international director for Interporc, which represents Spanish pork producers.
“The strong Chinese demand for pork has provoked not only an increase in international export prices but also an important increase in domestic pork prices,” he said.
Chinese import demand has coincided with spreading African swine fever in other parts of the world such as eastern Europe and south-east Asia, including Vietnam, Cambodia and Laos. In recent days the Philippines has become the latest country to confirm an outbreak of the disease.
As a result, leading producers in Europe have remained cautious about increasing production.
“With ASF spreading [mainly among wild boars] in Europe at the moment, the biggest producers like Germany are frightened of expanding,” said Peter Duggan of the Irish Food Board.
Beijing has approved several Irish pork suppliers, and China is now the country’s second-largest meat export market after the UK. Over the course of this year exports to China are expected to rise 40 per cent to 80,000 tonnes, said Mr Duggan.
China’s strict regulations on foreign suppliers limit its scope for imports. Beijing requires them to pass Chinese inspections and avoid the use of Ractopamine, an additive widely used to fatten pigs in the US in order to be certified.
Chinese vice-premier Hu Chunhua told officials last month that the country faced a 10m-tonne pork shortage and increasing domestic production was a “political task”. He urged for more financial support for the industry and a relaxation of environmental regulations that have led to the closure of hundreds of thousands of small pig farms in recent years.
But analysts expect domestic pork production will take years to reach pre-outbreak levels. Goldman Sachs says that China’s pork production may not return to growth until mid-2021.
As a result, while imports accounted for 3 per cent of China’s pork consumption last year, they could account for 10 per cent over the next few years, said Jim Huang of consultancy China-America Commodity Data Analytics.
Tom Hancock, Wang Xueqiao, Emiko Terazono and Andres Schipani