Source: Huaxia Times

Before the outbreak of the trade war between China and the United States, Chinese mainland and Hong Kong were the second largest export market for US pork. The market has been expecting China to buy more US pork because of the African classical swine fever epidemic in China, but Chinese buyers are less willing to buy more US pork during the trade war.

The suddenly escalating trade dispute between China and the United States roared bullets at imported pork.

Chinese buyers cancelled their purchases of nearly 3250 tons of US pork last week, according to data released by the U.S. Department of Agriculture on the 16th.

China is the world's largest importer of goods and the third-largest market for U. S. pork exports. Before the outbreak of the trade war between China and the United States, Chinese mainland and Hong Kong were the second largest export market for US pork. The market has been expecting China to buy more US pork because of the African classical swine fever epidemic in China, but Chinese buyers are less willing to buy more US pork during the trade war.

It is understood that this is not the first time that China has "fired" US pork, but it was the biggest drop behind the start of the trade war in April last year. China cancelled 53 tons of pork orders at the end of February, 999 tons in March and 214 tons of imported pork last month, according to the Ministry of Agriculture.

Mei Xinyu, a researcher at the Institute of International Trade and Economic Cooperation of the Ministry of Commerce, warned that sow feed production fell 25.5 percent in March compared with the same period last year, if this means that the number of pigs and the number of pigs in the future will be reduced by 1/4. This may have a serious impact on the entire food market in the future, which requires additional attention.

However, Meng Wei, spokesman for the National Development and Reform Commission, said that due to the superposition of factors such as the African classical swine fever epidemic and the "pig cycle", pig and pork prices may rise to a certain extent in the later stage. However, as China's livestock and poultry, aquatic products, eggs and other commodity production and supply is relatively sufficient, household consumption will not be greatly affected.

"the level of pork consumption in our country has declined in recent years, and pork consumption in 2018 is much lower than that in 2014." Chen Yanli, an associate researcher at the Rural Economic Research Center of the Ministry of Agriculture and Village, told the Huaxia Times.

It is worth noting that Meng Wei said that he will continue to closely monitor the price trend of live pigs and pork, make preparations for regulation and control with relevant departments, and take relevant measures to stabilize supply and prices if necessary to ensure the basic livelihood of the people.

Pork war

Tang Ke, director of the Marketing and Informatization Department of the Ministry of Agriculture and villages, said at a news conference that the stock of live pigs and breeding sows has expanded month by month since the outbreak of classical swine fever in Africa in August last year. Citing expert judgment, he warned that pork prices could rise by more than 70% year-on-year in the second half of the year, an all-time high.

According to the data released by the Ministry of Agriculture and Village, in January 2019, the stock of live pigs and breeding sows dropped sharply, and recorded the biggest decline in more than 10 years.

It is understood that the national pig stock has declined for 62 consecutive months since December 13 compared with the same period last year, while the stock of fertile sows has declined for 65 consecutive months since September 2013. According to the data, in January 2019, there are about 28.61 million sows and 363.99 million live pigs.

The change of the year-on-year growth rate of pig stock has certain periodic characteristics. Over the past 17 years, the year-on-year growth rate of pig stock has continued to decline from-3% to 12.62% in January 19, reflecting the accelerated elimination of pig stock, while the stock of breeding sows in January 19 has dropped to 14.75% year-on-year, close to the low of the previous cycle. This means that the supply of live pigs will be greatly reduced in 19 years, which will greatly affect pig prices in 2019.

According to data released by the National Bureau of Statistics in the first quarter, China's pork production fell 5.2 per cent to 14.63 million tons in the first quarter. According to the fixed-point monitoring of 400 counties by the Ministry of Agriculture and villages, the stock of pigs dropped 1.2% in March from the previous month, down 18.8% from the same period last year. The stock of fertile sows dropped 2.3% from the previous year and 21.0% from the same period last year, the largest year-on-year decline in nearly a decade. It is clear that the supply of pork in China is declining, which has also contributed to the rise in pork futures prices in the United States. CME Group Inc's American lean pig futures price has risen 59% since March, with a strong speculative nature.

At this time, the trade dispute between China and the United States is escalating and there is smoke everywhere. Chinese buyers cancelled their purchases of nearly 3250 tons of US pork last week, according to data released by the U.S. Department of Agriculture on the 16th.

In fact, as early as April 1, 2018, China announced a 25% tariff on American pork and products in response to the Trump administration's move to impose tariffs on Chinese goods. Chicago Mercantile Exchange (CME Group) lean pig futures prices suffered a blow, falling to a 16-month low.

China is the third-largest market for US pork exports, according to 2017 US trade data released by the U.S. Department of Agriculture (USDA). At a time when American pig farmers are suffering from already weak Chinese demand, the threat from big pork buyers around the world has made it even worse. On the first trading day after the Easter holiday, CME lean pig futures fell to 54.500 cents a pound, the lowest since December 7, 2016. The contract has fallen nearly 28% since hitting a six-month high on February 5th.

While canceling the US pork import order, China has set its sights on the vast international market.

"We are prepared to increase the supply of quality meat to the Chinese market." The Brazilian Ministry of Agriculture said by email that Brazil would provide the Chinese authorities with exact information about the meat packing plant applied for within a week.

Or sell to insure the price

After blatantly rejecting American pigs, the price volatility in China's pork market has become complicated and confusing.

Since last year, domestic pig prices in China have been in the doldrums after a "crazy pig cycle", falling all the way down from more than 20 yuan / kg. Pig prices rose rapidly from their lows after the Spring Festival this year and have stabilized since April. On May 8, the national average pig appearance price was 15.16 yuan per kilogram, up 8.9 percent from the beginning of the year and 45.8 percent higher than the same period last year. The year-on-year increase was mainly due to a low base of pig prices in the same period last year, when it was 10.4 yuan per kilogram, the lowest level since 2011. In terms of the longer cycle, the current pig price is about 2.1% lower than the average since the beginning of 2015.

In Mei Xinyu's view, Chinese pork has a potential supply shock, which should be paid attention to.

The recent trend of pork prices has attracted widespread attention from all parties. Affected by the African classical swine fever epidemic, the 'pig cycle' and other factors, pig and pork prices may rise to a certain extent in the later stage. However, as China's livestock and poultry, aquatic products, eggs and other commodity production and supply is relatively sufficient, residents' consumption will not be greatly affected. " Meng Wei said.

Meng Wei said that he will continue to closely monitor the price trend of live pigs and pork, make preparations for regulation and control with relevant departments, and take relevant measures to stabilize supply and prices if necessary to ensure the basic livelihood of the people.

For China, however, the decline in pork stocks may not be as big a problem as thought. A key problem is that middle farmers eat less meat, and pork consumption in 2018 is much lower than it was four years ago.

The data show that after peaking at 57.19 million tons in 2014, China's pork demand continues to decline, and pork demand in 2018 is much lower than that of four years ago, and the African classical swine fever factor has led to a large number of consumers taking the initiative to reduce pork consumption. By 2014, pork demand could grow by an average of 5.7 per cent a year. In 2018, China's pork consumption was 55.95 million tons, much lower than in 2014 and 0.3 per cent lower than in 2017, compared with 56.11 million tons in 2017. Pork production decreased by 3.63% in 2018 compared with 2014.

China's pork consumption continues to decline for a number of reasons. For example, people began to pursue a healthy diet, beef, mutton and poultry have all continued to grow, but pork is declining. Secondly, the aging and the negative growth of the labor force have also brought changes to pork consumption.

At present, it seems that these factors leading to the decline in pork consumption continue to exist, coupled with the African classical swine fever factor, also led to a large number of consumers to take the initiative to reduce pork consumption. As a result, supply is shrinking while demand is shrinking.

Although Chinese consumers' enthusiasm for pork is waning little by little, from a global point of view, China is still a big producer and consumer of pork. According to a report from the U.S. Department of Agriculture, in 2017, China produced 53.4 million tons of pork, 2.3 times that of the European Union and 4.6 times that of the United States. In the same year, China consumed 54.812 million tons of pork, 2.6 times that of the European Union and 5.7 times that of the United States.

Although there may be a shortage of pork in China next year, pork has never been short of import channels and has never been dependent on foreign imports. In 2017, China's total pork output was 53.5 million tons, while the import volume was only 1.22 million tons.

From January to July 2018, the pork output of Russian agricultural enterprises reached 2.31 million tons, an increase of 10.9 percent over the same period in 2017. Previously, Russia's Siberian Group had shipped 240000 tons of pork to China, enough to make up for the shortfall in the United States.