China’s coronavirus outbreak has had a limited impact on pork trade so far, but could create challenges in the market in future, according to AHDB analyst Bethan Wilkins.
The outbreak has coincided with the Chinese New Year holiday period, which is already a quiet period for business. “So, so far, disruption to imports has probably been limited,” she said.
However, this week China suspended pork trading, seemingly to investigate whether the meat can carry the virus between regions. “Although trade is to be resumed next week, the US hog futures market reacted negatively to the news. It is possible that further logistical problems could emerge going forward,” Ms Wilkins said.
But there could be an upside, too, in terms of trade. “On the other hand, Brazilian exporters (including JBS) reportedly believe the coronavirus outbreak could increase demand for imported pork, due to concerns around domestic food safety. Clearly, with the situation still developing, any possible impact is difficult to anticipate at this time,” she added.
“Nonetheless, considering the extent of the supply gap expected, it currently still seems likely suppliers will find ample opportunities, and strong prices, on the Chinese market this year.”
Pork prices in China have been at historically high levels since August. In December, the national pork price averaged CNY 47/kg (£5.27/kg), live pig prices were CNY 34/kg (£3.81/kg) and piglets averaged nearly CNY 90/kg (£10.08/kg).
These prices are slightly below the October/November peak, Ms Wilkins said. “The government has taken action to quell escalating prices for the Chinese New Year celebrations in late-January. Frozen pork stocks have been released and import levels have increased. Nonetheless, prices are still more than double year-earlier levels, and much higher than the previous peak in 2016,” she added.
In 2019, pig meat and offal imports to China were up 41% year-on-year, totalling just over 3 million tonnes, with volumes higher by 97% in the final quarter. Imports in November and December increased by 93% and 121% respectively.
Spain and Germany remain the top suppliers. Volumes from the US have recovered from a low point in 2018, especially towards the end of the year, despite ongoing additional tariff barriers. Nonetheless, volumes remain lower than in 2017 for the year as a whole. In the final quarter, shipments from Canada dropped sharply due to the import ban; this was lifted in early November but may take a couple of months to be reflected in the import figures.
“The pace of imports is reported to have dropped off somewhat recently,” Ms Wilkins added. “However, this is generally thought to be a short-term development, as the pork supply gap will probably be even larger this year.
“The latest USDA outlook anticipates a further 23% drop in Chinese production this year, with a 42% rise in import levels. The drawdown of stocks and slaughter of pigs to serve the Chinese New Year market may well lead to particularly tight supplies in the subsequent months.”
Two weeks ago, the US and China signed a trade deal and this could potentially help boost Chinese pork imports.
“However, a lack of detail around China’s pledge to buy more US agricultural products has made the market uncertain. US pork prices are considerably lower than in the EU, and if realised, increased competition from the US might take some of the shine off the EU market,” Ms Wilkins said.