Mecardo Analysis - Our exports a drop in Swine Fever Ocean
- By: "Farm Tender" News
- Machinery & Equipment News
- Apr 16, 2019
- 468 views
- Share
By Angus Brown | Source: USDA, Rabobank, Reuters.
This article is bought to you by Mobile Plunge Dipping Services.
We have been hearing bits and pieces about African Swine Fever (ASF) spreading across China and other parts of Asia, and it’s starting to have an impact on our markets. We thought it was time to take a look at how ASF is impacting pork production, and why our red meat markets are seeing a benefit.
Ad - Control those lice with Mobile Plunge Dipping Services - Ad
Ad - Control those lice with Mobile Plunge Dipping Services - Ad
ASF is not harmful to humans, but it does have close to 100% mortality in pigs. ASF is spread through feeding waste to pigs, and can be carried in pork, and transmitted on dirty boots. As such ASF seems very hard to control, and given 30% of China’s pigs are in backyard operations, its hard to strengthen biosecurity measures.
Since August last year, China has reported 124 outbreaks of ASF, and according to official reports, have culled 1.01 million head of pigs. Figure 1 shows that the USDA expect China to have 428 million pigs this year, and as such the number culled represents just 0.23% of the Chinese total. Based on official numbers ASF is not having much impact. However, some of the forecasts which have been released recently are much scarier. Some analysis from Rabobank released last week forecast 150-200 million pigs will die from ASF in China. This represents 35-46% of Chinese pigs, and 19-26% of world numbers.
In terms of pork production, China is still the world’s biggest, but the higher efficiency in Europe and US means that last year it accounted for 48% of world supplies, as opposed to 55% of total numbers. Figure 2 shows how expected world pork production has fallen according to the United States Department of Agriculture from its October forecast to April. The last bar shows Rabobank’s forecast of a 30% year on year decline in China.
A 30% decline in Chinese pork production is massive. It equates to 16.8 million tonnes. The US produces just 12.4 million tonnes in total, so there is no way the pork will be replaced by imports.
Ad - Control those lice with Mobile Plunge Dipping Services - Ad
Ad - Control those lice with Mobile Plunge Dipping Services - Ad
While many Chinese will miss out on meat protein, those than can afford to are turning to imported meat, but it’s a drop in the ocean. If Australia’s record beef exports to China keep going, it will total 200,000 tonnes for the year.
For lamb and mutton we have also seen a record start to the year for exports to China. If exports continue at the current rate we will export 124,000 tonnes of lamb and mutton.
If we add record lamb, mutton and beef exports together, China might take 324,000 tonnes of red meat. Our total exports would fill just 2% of the protein hole left by lower Chinese pork production. Our increase in exports on last year will account for just 0.36% of the decrease in Chinese pork supplies.
Key points
* Asian Swine Fever is wiping out huge numbers of Chinese pigs.
* Rabobank are forecasting Chinese pork production to fall 30% in 2019
* Our beef and sheepmeat exports in China are increasing, but are tiny compared to hole left in Chinese meat supplies
What does this mean?
In normal markets a massive fall in supplies of pork would see a strong hike in prices, and subsequent shifting of demand to other meats, and rising prices for those substitutes. However, we know the Chinese markets are not normal, with intervention from Government likely to keep meat affordable. Figure 3 shows Chinese Pork price have risen, but are not back to the highs of 2016 yet.
As such there will be a limit to what China will pay for our export beef and lamb, but given the stronger demand it’s safe to say export values are unlikely to fall any time soon. At a time when our supplies of beef and mutton are likely to tighten significantly, the African Swine Fever factor is going to add more strength to what is already a strong market, which is going to get stronger.
There is some downside for grain growers however. Lower pig numbers mean feed grain demand from China will be weaker, which could put further pressure on feed barley values.
Share Ag News Via