It will take China “at least five years” to recover from its African swine fever epidemic, Rabobank said, although it trimmed forecast for the country’s pork imports next year, amid a “complicated trade picture”.
The bank - firming up on a forecast of 50% shrinkage in China’s swine herd this year thanks to the outbreak – warned that “there is no way to stop the spreading of the disease, only to mitigate its impacts”.
Restating ideas too of a 25% pork production loss in China, and of a 10-15% loss in Vietnam, where the disease is spreading too, Rabobank said that the outbreak would be a “multi-year” issue that will cause “structural change” to world meat markets.
With “few signs of success to date in controlling” the spread of African swine fever (ASF), it “will take years – at least five years – for herds to be rebuilt and for production to recover in the worst-affected countries”.
This signals prolonged pressure for Chinese imports of pork, and other meats, to fill the void in domestic supplies, which has already become evident in a rise in the country’s pork prices to a record high above 30 yuan per kilogramme this month.
“Both live hog and pork meat prices have set new records, exceeding the previous peak in 2016,” the bank said, although noting that piglet prices had thus far remained below highs of three years ago, reflecting “cautious” among farmers at rebuilding herds.
“Restocking has been tried on a small scale in 2019, but very few have succeeded.”
Pork prices “are expected to rise further”.
Pork imports to grow
This will help encourage further growth in Chinese imports in the second half of 2019, after 12% expansion in the January-to-June period, with purchases for the full year expected at some 3.2m tonnes, narrowly exceeding the current record reached in 2016.
While Rabobank forecast a further increase in pork imports in 2020, to 4.0m tonnes, that was a little below its expectation voiced last month.
It flagged “complications” to trade picture from factors including Chinese trade spats with Canada and the US, and the fact that European Union prices are also high.
“The EU is a major pork exporter, but its relatively high prices challenge its competitiveness”, the bank said, noting too a “cautious production response” in the bloc to more elevated prices, which were highlighted separately on Tuesday by results from pork producer FirstFarms.
Brazil is one key pork exporter which could raise shipments to China, “if and when supply increases”, with the South American country currently continuing to focus on the Russian market.
Brazil will, however “continue to dominate poultry exports China”, where consumers have to a large extent switched from pork to chicken.
In Chinese retail markets, “pork prices have correlated with poultry prices”, which have “increased strongly… reflecting the substitution effect”.