The supply-and-demand calculus is clear: Demand is high, supply is low, and those selling pork will find buyers
International pork markets are in disarray, but the prospects are good for pork producers here — even after Beijing’s new ban on Canadian pork exports.
China had been a hot market for Canadian pork this year, with its purchases jumping by more than half in the first four months and moving the nation ahead of the U.S. and Japan as our top customer.
“China was going to be an important market for our industry this year,” said Gary Stordy, director of government and corporate relations with the Canadian Pork Council.
“Unfortunately, we no longer have access to that market.”
However, the expectation is that pork Canada was going to ship to China will be absorbed by the North American market and ones in Asia.
Still it’s a big gap to fill.
Last year, China accounted for about 20 per cent of Canadian exports — and 13 per cent of total overall production. That does not include offals such as tendons, tripe, heads and feet, which are produced every day by packers.
“China was also very important in terms of frozen product, and was a huge buyer of bone-ins and such,” said Kevin Grier, a livestock market analyst.
The sector will now have to turn to secondary markets, and in the short term, there are logistical issues when switching to buyers in other countries, he added.
“Canadian pork will go, but everything is less optimal,” said Grier. “We’ve lost a market. The immediate market is messy.”
However, the other side of the coin is that China is a huge consumer of pork that suddenly finds itself with a huge shortage of its most widely consumed meat.
“China as a country produces 50 per cent of all the hogs in the world,” said Brent Bushell, general manager of the Western Hog Exchange. “In terms of African swine fever, they’ve taken quite a beating. There have been reports that their herd is down 50 per cent.”
If that estimate is true, then one-quarter of global pork production has vanished since the first case of African swine fever was found in China last summer.
“If you took all of the U.K. production in a year of hogs, China consumes that in six days. It’s huge,” said Bushell.
That also puts into perspective the recent 20 per cent surge of British pork exports — if sustained for an entire year, that increase would only provide an extra day’s worth of pork for Chinese consumers. (Pork accounts for 65 per cent of China’s meat consumption.)
Still, the world’s most populous nation has not really started upping its pork imports to any great extent because it’s still culling herds in areas where African swine fever has been found, said Grier. (The disease, while deadly to pigs, poses no threat to humans.)
When China does go looking to buy pork, many countries — like the U.K. — will not be able to provide meaningful volumes. As well, U.S. pig farmers have seen sales to China plummet after Beijing raised tariffs to 62 per cent (from 12 per cent previously) last year as part of its trade war with Washington.
“The U.S. has more hogs than ever before, and more pork than ever before,” said Bushell. “The trade wars haven’t helped American hog producers.”
Still the American hog herd is growing, partly in hopes that the two nations will strike a deal and drop the increased tariffs. And if that happens, Canadian hog prices could increase.
That’s partly because Canadian prices are based off American prices but also because the world is short of pork, said Bushell.
He predicts there will be a lot of trading and “musical chairs” as countries attempt to fill the demands of the pork market.
And that may be another bonus — China’s trade ban proves that Canada needs to diversify its pork markets, said Bushell. He pointed to Japan as a model for trading relationships, noting Canada has built strong relationships with buyers there.
Canada’s pork will also go to backfill the markets that China is buying from, said Grier. Those markets include the United States, the European Union and Brazil.
He does not expect that Canadian pork producers should suffer, because their prices are tied to American prices. Packers who are tied to Canada might struggle, however, he said.
“The end of third and fourth quarter could see record historical pricing in pork. That will not hurt Canadian hog producers at all,” said Bushell.