February 9, 2021
Winners, losers and impending competition in the world pork trade
Europe made the most of China's ASF driven import boom but nations with fast growing meat demand will be at an advantage –if they can get past COVID-19 lockdowns.
By Eric J. Brooks
An eFeedLink Hot Topic
In the previous two years of 17% annual growth in world pork exports, the big "winners" of African swine fever (ASF) afflicted China's pork import flood were Brazilian and European exporters. Having risen from 0.8 million tonnes in 2018 to 1.75 million tonnes in 2019, 2020 EU pork shipments to China exceeded 2.7 million tonnes. They would have been even higher had German pork not fallen victim to ASF and been banned in Q4.
With shipments to China going from 5% of total EU exports in 2010 to 62.3% last year, European pork exports jumped 22.5%, from 3.55 million tonnes in 2019 to 4.35 million tonnes in 2020.
Led by Spain's 1 million tonnes, 2020 EU pork exports to China totaled 2.7 million tonnes. The only downside being that rising EU shipments to China partly occurred at the cost of flat or slightly lower pork exports to every other major import market.
In a year when EU domestic pork consumption fell 3.8% from 20.42 to 19.67 million tonnes, the EU's million tonne in exports to China kept the continent's domestic pork production constant near 24 million tonnes.
On the other hand, a drop in exports to China is expected to cause the EU's 2021 pork exports to decline 5.7% to 8.0%, into the 4.0 to 4.1 million tonne range. Although the USDA expects European pork production to stay flat, with COVID-19 cases setting new records, lockdown-happy EU nations may destroy enough demand to make pork production fall towards 23 million tonnes.
With lower costs complemented by better domestic and trade growth prospects, Brazilian pork growers have a happier future: After 15 years of stagnant fluctuation in the 0.6 to 0.8 million tonnes due to food safety issues and politically motivated trade bans, Brazilian pork exports jumped 36.8% to 1.178 million tonnes. It is the first time they exceeded 0.9 million tonnes, let alone a million tonnes. Most of the credit goes to China, as its imports of Brazilian pork skyrocketed 136%, from 220,000 tonnes in 2019 to approximately 520,000 tonnes this year.
Although exports to Hong Kong (+20%) and Singapore (+7%) performed well, their collective 40,000 tonne on-year increase was dwarfed by the increase in shipments to China. Moreover, exports to Chile, Uruguay, Argentina and Russia were below 2019 levels and below records established in the 2010s.
The USDA first projected Brazil's 2020 pork production at 4.03 million tonnes and later revised it to 4.125 million tonnes. With exports leading the way, this is up 1.3% on 2019's 3.975 million tonnes. It now expects a 3% rise in Brazil's 2021 pork output to 4.25 million tonnes. But after last year's 36.8% rise, export volumes are expected to increase only 4.4% to 1.23 million tonnes. It is hoped that higher pork demand recovering Latin American economies (including Brazil itself) will offset any decline in exports to China.
Boosted by its Phase 1 Trade Agreement with China, US pork exports jumped 15.6%, from 2019's 2.867 million tonnes to 3.318 million tonnes. This was fortunate: American pork exports to China and Hong Kong jumped 72% or 480,000 tonnes. Totaling nearly a million tonnes, America supplied more pork to China than any other nation.
On one hand, with China powering a 451,000 tonne rise in US pork exports, it helped offset a 171,000 tonne drop in COVID-19 afflicted US pork consumption at a time when US pork output rose by 2.4% or 298,000 tonnes, to 12.841 million tonnes. This provided America's swine sector critical support, minimizing the COVID-19 downturn in US hog prices and enabled lean hogs to enter 2021 nearly 20% higher than they did 2020.
Unfortunately, while America's pork exports to China rose 480,000 tonnes, shipments to all other nations fell 30,000 tonnes. This is because with COVID-19 labor shortages and logistical difficulties limited the supply of slaughtered hogs processed into pork. With more export demand than pork available for export, shipments to South Korea fell nearly 25%, as it could fetch a higher export price in China. In 2021, US pork exports are expected to stay flat near 3.3 million tonnes, as lower Chinese import demand will be offset by higher export volumes to traditional US pork customers in Japan and South Korea.
Going forward, with Korean and Japanese meat demand growing only 1% yearly, they would be fortunate to boost their import volume by 0.5 million tonnes by 2025 – far short of the forecast 3 to 3.8 million tonne reduction in Chinese pork imports. The impact will be most strongly felt by EU pork exporters, which currently ship 60%+ of their exports to China.
While also dependent on China, Brazil has the advantage of cheap pork that undercuts EU prices in the competitive Chinese market. Provided it recovers from COVID-19 lockdowns, Brazil's emerging economy can expand meat demand rapidly enough to absorb any pork exporting losses.
A mature economy where domestic meat demand continues to grow twice as fast as that of the EU, Canada or Australia, America has the capacity to absorb falling export demand. Thanks to the USMCA, America has also renegotiated its trade access to Mexico, the fastest growing large pork import market outside of Asia. Hence, provided both America and Mexico end their COVID-19 lockdowns soon, American pork farmers may prosper despite the steep, projected fall-off in Chinese imports.
Consequently, at this time, America and Brazil are well-poised to ride out a 3 to 4 million drop in Chinese pork imports, with Europe and Canadian pork producers bearing the most economic pain.
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