The outbreak of African Swine Fever (ASF) in pigs that has spread through China and much of southeast Asia means that we are potentially looking at global shortages of meat and dairy proteins that could last two to three years, a leading commodity analyst has claimed.
In his keynote address at the annual WR Barnett / R&H Hall conference held in Dublin, Dan Basse, the president of Chicago based AgResource, pointed to best estimates that suggest the Chinese pig herd will be down 70% on 2018 figures by the end of this year. That culling is expected to continue into 2020. In recent years, around 62% of all meat consumed in China was pork.
“If China bought (the equivalent of) all the beef, poultry and pork that was traded in the world last year, it still can’t match this hole (in its domestic pork production), and it leaves everyone else short. That’s how big this is,” said Basse.
As a result, he is bullish for global meat protein prices over the next two to three years. Dairy commodity prices will also benefit, with strong demand coming from China for milk powders, especially whey to feed piglets.
The shortfall in Chinese production has started to hit consumers, with pork prices jumping 69% in the last few weeks. As a result, food inflation is currently running at 11%, and could reach 15% next year.
“Politicians have reacted too late, and China needs to import more protein. Red meat and poultry imports are skyrocketing,” said Basse.
He maintained that even though US hog producers face a 72% tariff on imports to China, the combined US price plus tariff is still only half of the Chinese price, so US companies are gearing up to supply the market.
However, given its ability to produce large quantities of meat proteins, the big winner is likely to be Brazil, which inevitably will create shortages elsewhere. The main losers are likely to be poorer countries in the developing world who won’t be able to buy at the higher prices.
Grain
The other downside is for grain producers, with China the last demand driver in global grain markets.
“Due to ASF, it has all changed now. China was supposed to be importing 107mt of soya this year. It is more likely to be 80mt,” said Basse.
Unless there are significant weather problems in a major grain growing region, he is not bullish on prices for wheat, maize (corn) or soya next year and beyond.
Longer-term, it is thought that it will take three to five years for the Chinese pig herd to recover from ASF, but it will return with a new, more efficient industry, so sow numbers will not reach pre-ASF levels.
“There will be a leftover impact on soyabean imports going forward,” said Basse.
He also predicted that ASF will reach the Americas in the next 10 years.
“There will be panic when that happens,” he suggested.
No-one else talking sustainability?
While the debate on these islands has intensified around carbon, climate change, and ultimately the sustainability of farming and land use, Basse alleged that it is not a debate that is happening elsewhere.
“In south America and Africa sustainability of land use doesn’t get talked about. You are on an island in that regard. If you limit chemicals here, you just give others an advantage. We need real measurable facts” he said.
Taking business in China seriously
Companies looking to do business in China need to proceed with care, Richard Herzfelder from consultancy firm Gira told attendees at last week’s Barnet/Hall conference.
Herzfelder, who lived in China for 28 years, said that in general, Chinese people are very patriotic, and with the country set to become the world’s largest economy within the next 10 years, this is seen as a return to normal for some.
“Many Chinese people believe the current leadership is taking the country back to its natural role as a world leader – the central country of the world,” said Herzfelder.
He suggested that smaller countries, such as the Republic of Ireland, are in a good position to supply, as bigger countries tend to have more complex relations with China.
He cited a number of examples where a government action, or comment, prompted a backlash by Chinese authorities.
For example, Norway awarded the Nobel Peace Prize to human rights activist Liu Xiaobo in 2010. Soon after, Norway found its fish excluded from China, and only after years of intense diplomacy is Norwegian salmon returning to the market.
“There is money to be made, but be cautious,” said Herzfelder.
Read more
Irish pig prices hit 20-year high
African swine fever to transform global protein industry
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The outbreak of African Swine Fever (ASF) in pigs that has spread through China and much of southeast Asia means that we are potentially looking at global shortages of meat and dairy proteins that could last two to three years, a leading commodity analyst has claimed.
In his keynote address at the annual WR Barnett / R&H Hall conference held in Dublin, Dan Basse, the president of Chicago based AgResource, pointed to best estimates that suggest the Chinese pig herd will be down 70% on 2018 figures by the end of this year. That culling is expected to continue into 2020. In recent years, around 62% of all meat consumed in China was pork.
“If China bought (the equivalent of) all the beef, poultry and pork that was traded in the world last year, it still can’t match this hole (in its domestic pork production), and it leaves everyone else short. That’s how big this is,” said Basse.
As a result, he is bullish for global meat protein prices over the next two to three years. Dairy commodity prices will also benefit, with strong demand coming from China for milk powders, especially whey to feed piglets.
The shortfall in Chinese production has started to hit consumers, with pork prices jumping 69% in the last few weeks. As a result, food inflation is currently running at 11%, and could reach 15% next year.
“Politicians have reacted too late, and China needs to import more protein. Red meat and poultry imports are skyrocketing,” said Basse.
He maintained that even though US hog producers face a 72% tariff on imports to China, the combined US price plus tariff is still only half of the Chinese price, so US companies are gearing up to supply the market.
However, given its ability to produce large quantities of meat proteins, the big winner is likely to be Brazil, which inevitably will create shortages elsewhere. The main losers are likely to be poorer countries in the developing world who won’t be able to buy at the higher prices.
Grain
The other downside is for grain producers, with China the last demand driver in global grain markets.
“Due to ASF, it has all changed now. China was supposed to be importing 107mt of soya this year. It is more likely to be 80mt,” said Basse.
Unless there are significant weather problems in a major grain growing region, he is not bullish on prices for wheat, maize (corn) or soya next year and beyond.
Longer-term, it is thought that it will take three to five years for the Chinese pig herd to recover from ASF, but it will return with a new, more efficient industry, so sow numbers will not reach pre-ASF levels.
“There will be a leftover impact on soyabean imports going forward,” said Basse.
He also predicted that ASF will reach the Americas in the next 10 years.
“There will be panic when that happens,” he suggested.
No-one else talking sustainability?
While the debate on these islands has intensified around carbon, climate change, and ultimately the sustainability of farming and land use, Basse alleged that it is not a debate that is happening elsewhere.
“In south America and Africa sustainability of land use doesn’t get talked about. You are on an island in that regard. If you limit chemicals here, you just give others an advantage. We need real measurable facts” he said.
Taking business in China seriously
Companies looking to do business in China need to proceed with care, Richard Herzfelder from consultancy firm Gira told attendees at last week’s Barnet/Hall conference.
Herzfelder, who lived in China for 28 years, said that in general, Chinese people are very patriotic, and with the country set to become the world’s largest economy within the next 10 years, this is seen as a return to normal for some.
“Many Chinese people believe the current leadership is taking the country back to its natural role as a world leader – the central country of the world,” said Herzfelder.
He suggested that smaller countries, such as the Republic of Ireland, are in a good position to supply, as bigger countries tend to have more complex relations with China.
He cited a number of examples where a government action, or comment, prompted a backlash by Chinese authorities.
For example, Norway awarded the Nobel Peace Prize to human rights activist Liu Xiaobo in 2010. Soon after, Norway found its fish excluded from China, and only after years of intense diplomacy is Norwegian salmon returning to the market.
“There is money to be made, but be cautious,” said Herzfelder.
Read more
Irish pig prices hit 20-year high
African swine fever to transform global protein industry
Listen: wetter winters, dryer summers and invasive species - climate change
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