2020 is the Year of the rat, an animal that symbolises wealth, according to the Chinese zodiac. A better description might be the year of the virus. Covid-19 originated in Wuhan late in 2019 and quickly spread globally this year; it will be with us for a long time, said Chinese medical experts back in April, a view that Anthony Fauci, director of the US National Institue of Allergy and Infectious Diseases, shared. While Covid-19 has not been devasting for China (official figures report 85,214 cases and 4,634 deaths) it has disrupted many of the country’s supply chains and has provoked international criticism of China.
A worse virus?
The same is true of African Swine Fever (ASF), a virus that has arguably been much more damaging to China’s economy than the fall-out from Covid-19. A serious outbreak of ASF (lethal to pigs but harmless to humans) resulted in the destruction last year of half China’s pig herd of around 400m pigs.China has spent much of the first half of 2020 re-stocking its herd - and buying as many Brazilian and US soybeans as possible to fatten the new pigs - but we still do not yet know for certain how well that re-stocking has gone.
Moreover, China had tremendous flood problems in June and July this year, causing not just widespread crop losses but no doubt also helping to fuel fresh outbreaks of ASF among the many thousands of small backyard piggeries.
China’s pig herd in August was up 31.3% and the sow herd by 37% year-on-year, according to the country’s agriculture ministry. Do those figures truly take account of the floods impact?
Whether this re-stocking will be enough to keep pace with annual growth of consumption of pork (the favoured meat, with anual per capita consumption of around 38 kilos) of 7% is anyone’s guess. One dish that is likely to have been in great demand post-Covid-19 is pig lung soup, eaten to help treat breathing difficulties.
Pork is still in short supply in China, as evidenced by prices for pork rising 44% since the start of this year. China is to auction 20,000 tonnes of frozen pork from its state reserves on 18 September, having already sold 550,00 tonnes of the meat from its state reserves this yer.
This year should also have been one in which, following a ceasefire agreed between the US and China in their globally damaging trade war, should have brought more stability to international trade. In January the two sides signed Phase 1 of a trade pact, under which the US dropped its tariffs on $200bn of Chinese imports, in exchange China agreed to increase US imports, including agricultural goods.
The World Trade Organization (WTO) has now judged that the US blanket tariff imposition was illegal under global trade rules. President Trump is angry with the WTO and says it "lets China get away with murder." The last thing the world needs is for the WTO to fall into disarray. We need more rule-governed free trade and more transparency, not least from China, about agricultural supply and demand, and the level of reserves it holds.
It is impossible to divorce the political from the agricultural when it comes to China.
Last week the US threatened "Withhold Release Orders" on a broad range of cotton and tomato products from China’s Xinjiang region (the biggest cotton producing region in China, which is also the world’s biggest exporter of tomato paste) in response to allegations of human rights abuses of the minority Uighur community. That threat has now been lifted in favour of a ban on products from five specific and named entities. China’s foreign ministry says the US bans "sabotage" global supply chains.
China has banned pork imports from Germany, where ASF-infected wild boars have been discovered, and it has now suspended imports of poultry from a Mexican-owned US plant following a Covid-19 outbreak at the plant, the second poultry facility to have its Chinese exports banned. German pork exports to China more than doubled in the first half of 2020, 233,300 tonnes. During the same period the US exported a record 1.775m tonnes of pork to China
Food trumps politics
China has is likely to buy 91m tonnes of soybeans in the October 2020 to September 2021 marketing year, most of that quantity crushed for soymeal to feed its pig herd. China cannot produce enough of its own soybeans.
Its 2020-21 output of corn, another prime source of animal protein, will fall by as much as 4%, around 10m tonnes, following heavy winds and rainfall blighted crop expectations across the north-east corn belt and will be around 250m tonnes. Corn futures on the Dalian exchange have hit a record high, although as of today corn futures on CBOT remain almost 7.5% lower than October last year. China’s animal feed demand was forecast by the USDA at the end of June to be in 2020-21 21.45m tonnes, almost 5% higher year-on-year. Given the uncertainties regarding how well its hog re-stocking is going and how much damage has been done to its corn crop, its seems likely that both soybeans and, to a lesser extent, corn, will need to see big China imports to come.