Swine fever sparks global Chinese hunt for meat
China is scouring the world for meat after African swine fever wiped out millions of pigs. Prices, business and profits for European and South American meat packers have soared as it reshapes global markets for pork, beef and chicken.
The EU, the world’s secondlargest pork producer after China, lifted sales to the Asian giant though it can fill only part of the shortfall caused by the fever.
Argentina and Brazil have approved new export plants to meet demand, and are selling beef, chicken and pork to fill the gap. But US producers are hampered by tariffs Beijing imposed.
Other Asian countries are ready to step up imports as they deal with outbreaks of the disease. Vietnam, the Philippines, North and South Korea, Laos, Myanmar and Cambodia are all struggling to contain outbreaks of the disease, fatal to pigs but not harmful to humans.
“It is very good news for those involved in processing and have licences for exports to China,” said Justin Sherrard, global strategist for animal protein at Rabobank.
Major EU pork processors include Danish Crown, Tonnies Group and Vion Food Group although the market is fragmented with many small and medium-size players.
Shortages in the world’s top pork consumer have been exacerbated by approaching lunar new year celebrations in late January, when pork, and pork dumplings in particular, play a central role in food on offer.
One of the biggest European players, Danish Crown said there was a clear jump in demand from China in the runup to the Lunar New Year and its 2020 outlook was bullish.
China’s state-owned agriculture conglomerate Cofco said this week it had agreed to buy $100m of pork from Danish Crown in 2020 to help ease the domestic shortage.
New plants have been approved in South America.
Rabobank estimates that China’s hog herd, the world’s largest, fell by half in the first eight months of 2019 and will probably shrink 55% by the end of the year.
Many more meat plants in Argentina and Brazil have recently been approved to export to China including beef and chicken as well as pork.
Nicholas Lafontaine, a cattle rancher Azul, 300km southwest of Buenos Aires, said China had traditionally taken cheap cuts with premium steaks destined for the EU.
China is now taking the whole carcass, reducing the amount of meat sold on the local market for Argentina peso, a currency that has lost about a third of its value in 2019. As processing margins have improved, plants have reopened.
“The other benefit that comes from growing Chinese demand is the reopening of beef plants, he said.
When a factory opens its doors it is thinking about China, according to Lafontaine.
Neighbouring Brazil has also benefited. According to Brazilian meat trade groups, Beijing authorized Brazil to more than double the number of beef plants with permits to sell directly to mainland China — to 33.
Brazil exported 1.64-million tons of beef in 2018 with China buying 19.3% of the volume, trailing only Hong Kong. The South American country’s exports are forecast to rise to 1.8-million tons in 2019.
“China is the market paying the highest premiums for Brazilian meat packers,” said Luciano Pascon, CEO of private meatpacker Frigol.
Hefty tariffs on American pork imposed by China as part of trade conflict are likely to mean that the US industry will benefit less than its rivals.
US meat packers such as Smithfield Foods have, however, been able to secure some direct sales. Tyson Foods expects to benefit from African swine fever by increasing sales to China or other countries as the outbreak redirects global meat trading.
Tyson Foods share price has risen about 50% so far in 2019.
Trent Thiele, a farmer who raises about 60,000 hogs a year in Elma, Iowa, said, however, the trade war is hurting US hog producers.
Thiele said he would prefer selling US pork to Chinese buyers than picking up residual business elsewhere in the world because China is a main buyer of products such as pigs’ feet and organ meat that other countries have little appetite for.
NOT A WEEK GOES BY WITHOUT SOMEONE VISITING US WHO WANTS TO GET INTO PIG FARMING
“A lot of our other competitor countries are obtaining the market share that naturally would have been ours if we didn’t have the retaliatory tariffs,” said Thiele, president of the Iowa Pork Producers Association.
Imported pork ribs now cost about 40,000 yuan (about R85,000) per ton, compared with 17,600 yuan in early 2019, traders said.
Prices for other cuts such as pig front leg and rib meat have roughly doubled in that period.
“Right now, prices are astronomical, and the risk is very high,” said a Beijing-based beef importer, who was struggling to gauge the right volumes to meet demand and avoid being left with expensive stock at the end of the holiday period.
The UN Food and Agriculture Organisation’s Meat Price index is up 12.5% so far in 2019 and is at the highest level since January 2015.
The pork component has risen by more than 20%.
The high global pork prices are even sparking interest in pig farming in predominantly Muslim Kazahkstan.
“Not a week goes by without someone visiting us who wants to get into pig farming,” said Maksut Baktibayev, chair of Kazakhstan’s Meat Union, an industry lobby group.