Pigs might fly- filling the protein supply gap in China

China's African Swine Fever problem brings opportunities


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PORK PRODUCTION: The outbreak of African Swine Fever in China last year has taken a toll on the nation's pig numbers and global repercussions are expected.

PORK PRODUCTION: The outbreak of African Swine Fever in China last year has taken a toll on the nation's pig numbers and global repercussions are expected.

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If someone came up to you at the pub and asked how many pigs there were in China, you could well be excused for wondering how that might be relevant.

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If someone came up to you at the pub and asked how many pigs there were in China, you could be excused for wondering how that might be relevant. With the outbreak of African Swine Fever in China last year, this question is now very important and something the global animal protein trade is talking about. We believe that for an Australian beef or sheep producer the situation presents some very positive upsides but maybe not where you would first expect.

There are more than 700 million pigs in China, with the country producing about 54 million tonnes of pork per year. To get some perspective on this, if you add up Australia's entire pork, poultry, beef and sheepmeat production, you would get to 4.5 million tonnes.

China's pork production is 12 times Australia's total animal protein production. At that size and representing about half the global pork production, anything that affects China's pork market will have an impact on global markets.

Rabobank recently revised our forecasts on the possible impact of ASF in China. Since the disease was first identified there in August last year, it has now become widespread across the country. Given the virulence and destructive nature of the virus together with its spread, we expect that China's pork production to drop between 25 and 35 per cent. That would be a drop in production of 13.5m to 18.9m tonnes.

China's protein consumption will decline as consumers there face price rise pressures and concerns around food safety - ASF does not have any impact on humans but consumer perception will influence some purchasing decisions. Despite this decline in consumption, we estimate that with added Chinese production of poultry, sheepmeat and beef, plus additional imports, there will be a net protein supply gap of almost 10m tonnes. This will inevitably lead to price rises.

Many are looking at this situation and asking what potential increased demand there will be for Australian beef by China. Australia's beef exports to China for the first three months of 2019 were up 67pc on the same time last year, but this is not just a result of ASF. Australian exports to China were performing strongly before the ASF outbreak with volumes in the eight months to August last year up 55pc on the year before, illustrating strong underlying demand from China for Australian beef.

While we can expect some increased demand, we need to also keep an eye on the indirect benefits of ASF. The possibility that China relaxes some of its border measures in light of rising meat prices would allow Indian buffalo to once again flow back into China, relieving some of the competitive pressures for Australian beef and live cattle in South East Asia.

China and the US may also resolve their trade issues and we might see volumes of US pork move to China, relieving some of the protein pressures in the US, stimulating US demand for beef, including Australian beef. So as a result of ASF, we may see markets in South East Asia and the US pick up as protein supplies around the world are redistributed.

  • Angus Gidley-Baird is a Rabobank senior analyst
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