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2021 World Pork Expo: Outlook for the Rest of 2021

13 September 2021, at 12:30am

Right now, the world pork market is in a highly volatile state, especially when it comes to China. Because of panic slaughtering and selling in response to new African Swine Fever (ASF) outbreaks, the market is flooded with pork products, which are driving down the selling price. The question is: where is all this pork going to go? The answer is a complicated one.

China has dramatically increased their pork imports. Over 8 million tons of total carcass weight were exported worldwide in 2018, 1.5 billion of which went to the Chinese market. Now, it’s forecasted that in 2021, China will receive 5.7 billion tons. This massive uplift is happening only because China is robbing domestic markets.

But why does China matter so much? And what does this mean for the rest of the global pork market?

At the 2021 World Pork Expo, Rupert Claxton from Gira Food laid out what changes we can expect over the long term as China changes their production and purchasing patterns. Here is a summary of his thoughts.

China is rebuilding their pork industry

From 2018 to 2020, China went through a decline in pork market share, along with many other animal sectors like chicken, beef, and even sheep and aqua. Overall, China ended up losing a net 26 million tons of pork in 2020.

This is primarily due to a resurgence of ASF, which has continued well into 2021. Vaccines were not as effective as they could be, and many farms didn’t invest in the necessary biosecurity measures that could have prevented an ASF resurgence.

However, there is some major reinvestment and rebuilding that is underway. For starters, China is working to industrialize their pork industry, which until now has mostly consisted of smaller, local farmers.

One of the new pig complexes houses 84,000 sows on a single site; the goal is to have a biosecure site that produces 2 million pigs per year. They began populating these facilities last year, and expect to have them fully populated this year.

However, it’s important to put their sow numbers in context. They’re using third-generation sows to inflate the population statistics. These sows are not nearly as productive as younger ones, and have a much poorer survivability rate.

Right now, the market is flooded with pork, which is leading to lower prices. However, as all of this pork is used, it will need to be replaced. This means that Chinese production will have to reach some ambitious targets, or expect a massive price spike toward the end of 2021.

Post-ASF recovery will lead to decreased demand

Currently, China comprises 26% of U.S. pork exports, leading Mexico which holds at 25%. One of the main reasons for this, in addition to ASF, is that they use bits of the carcass that no other country has a market for.

In terms of volumes of U.S. pork that’s exported to China, there were about 100,000 tons of product weight of meat pre-ASF, building up to 150,000 tons per month in 2019. Right now, the U.S. trading around 350,000 tons per month.

If China cuts back their demand, and all indicators seem to say they will, U.S. producers are going to have to find a new home for the 150-250,000 tons per month.

This raises the question of alternative pork markets. Australia is one market, given that the U.S. produces cheaper pork. Europe is less likely, due to their increased demand for organic and local production. Mexico, Japan, Korea, and Canada will still be strong markets, but there’s no signal that they will be anything other than a slow growth opportunity.

The two markets with the highest potential are Vietnam, which has lost 50% of their production due to ASF, and the Philippines. Vietnam presents an opportunity of a million and a half tons. Right now, they cannot compete with Chinese buyers, but if China backs off then they may be able to take some of that volume. While they will rebuild production, it likely won’t happen in the near term.

The Philippines present another opportunity. While they have been dialing back on imports to become more self-sufficient, politically this is not working as a policy.

Essentially, there are opportunities around the world, but none of them are at the same scale as China. The U.S. will have to work hard in a lot of markets to keep volume up as the world becomes much more competitive.

One encouraging sign is that the average price has been increasing over the past two years, which allows for packers to pay a better price effectively to producers at the same time, while not pushing the consumer price up. If we see consumer prices go up too far, consumer demand will drop off.

How should the U.S. pork industry respond?

The U.S. pork industry needs to find new international outlets for its product. While the domestic market provides some support, U.S. consumers don’t consume many parts of the carcass, including moon bones and pig feet.

Thus, the industry relies on export contribution that helps to pay those better prices back to the producers and offset the price, so they don’t pass it onto the domestic consumer.

Simply put, the U.S. hog industry cannot survive on the U.S. market alone. Even if 30% of production was shut today, we would still need the fraternization opportunities, the ability to put bits of the carcass in the international market, where prices are better than domestically.

Right now, China has become the go-to market for everyone, including the U.S., Europe, Brazil, and more. However, as China’s industry recovers, that competitive price is going to come down.

The U.S. needs alternative outlets in place, both as future leaders and as an insurance policy. We can’t be entirely reliant on China.

So where else can we build a reputation for what is a high quality, consistent product? That’s the million dollar question that we need to answer. And we’ve got to find an answer fast.