Posted on 05/09/2019 1:18:15 PM PDT by SeekAndFind
When China levied additional tariffs on pork from the United States last year, Zhu Mengzhou, a manager of an imported food distributor in Guangzhou, was one of many traders who stopped buying it.
“Unless the tariffs are adjusted, the cost is too high for us,” Zhu said.
Even as an outbreak of African swine fever threatens to decimate China’s most important meat market, Zhu cannot afford to resume US purchases due to two rounds of trade war tariffs which added a total of 50% to import duties. For some US pork products, Chinese buyers have to pay duties up to 70% just to get them past customs.
Zhu and many other pork traders in China – as well as the US – are watching anxiously as negotiators from both sides try to reach a deal to end the trade war, potentially scaling back pork tariffs in the process.
But any hope that the countries would reach a resolution soon was dashed after tensions once again rose this week following President Donald Trump’s threat to further raise tariffs on Chinese products from Friday.
The escalating trade war and the African swine fever epidemic have combined to exacerbate two of the biggest crises facing China’s slowing economy.
China's favorite meat: a vendor cuts a piece of pork for customers at a stall at the Xinfadi market in Beijing. China's favorite meat: a vendor cuts a piece of pork for customers at a stall at the Xinfadi market in Beijing. Photo: Bloomberg The disease has caused the most severe disruption to China’s pork industry in a decade, trimming 20% of the national supply and driving up prices, while the trade war is acting as a drag on exports and manufacturing.
Thanks to soaring pork prices, China’s consumer inflation rose to its highest level in six months in April.
China is struggling to fill a market gap that could see as many as 200 million pigs lost to disease or slaughter, according to a worst-case scenario study from Rabobank.
Given the need for China to import pork, expectations were high that pork tariffs would be at the top of the agenda in any trade deal, however, soybeans have threatened to further complicate the issue.
China is under huge pressure from US negotiators to purchase more American soybeans, a key crop for many of the farmers Trump hopes will help him win re-election in 2020.
In China, soybeans are mostly crushed to produce oil as well as soybean meal, a high-protein feed for livestock, including pigs, but falling pig numbers could reduce China's need for the crop.
If China’s pork production drops by 30%, soybean demand could fall by as much as 4.2%, HSBC said in a research report.
So keen is Trump to safeguard the rural vote, he reportedly requested that China shift its tariffs from agricultural products to other goods, as he bids to maintain his strong support in the farming heartland of the Midwest ahead of the 2020 election.
One knock-on effect suggested by HSBC’s analysts is that if China is unable to sanction the purchase of more soybeans, it may need to hasten the removal of pork tariffs to appease US pig farmers, who wish to sell to China.
Instead, China may agree to reduce or remove its additional duties on US pork if the [African swine fever] crisis leads to a sustained pork shortage," they wrote in a report released this week.
It is impossible to overstate the importance of pork to China’s culinary culture.
An Organization for Economic Cooperation and Development report from 2018 estimated that 60% of all the meat consumed in China was pork.
By 2026, the average Chinese person will eat 121 pounds of pork a year, a 10% increase on current estimates, or one pig for each of its 1.4 billion people.
If pork becomes unavailable, or too expensive, it could create the kind of domestic unrest Beijing is desperate to avoid.
Since the virus first appeared last August, it has ripped through all 31 of China’s autonomous regions and provinces, from Tibet in the west to the tropical island of Hainan in the south, within just nine months.
China has ordered the destruction of more than 1 million pigs, while other farmers rushed their livestock to market last year to avoid losing them to the illness. The virus, which does not affect humans, is untreatable and fatal to pigs and wild boar.
Pork production in China is forecast to decline by 10% in 2019, creating a surging demand for imports, Lindsay Kuberka, an economist at the US Department of Agriculture’s Foreign Agricultural Service, said in a report last month.
The cutback in production has already sent prices in China soaring, with piglet prices up 60% in rural markets since the beginning of the year.
HSBC said that pork prices could rise by as much as 30% year on year in 2019. In April, a Chinese agriculture ministry official warned that the outbreak could push prices up by as much as 70%.
"As pork supply diminishes, national pork prices are expected to rise and further suppress pork demand," Kuberka said.
In a sign of how desperate China is for imports, some purchases of US pork have resumed despite the tariffs.,
The US sold 112,000 tons of pork to China at the start of April, or nearly 20 times the 5,700 tons sold during the same period last year, according to data released by the USDA.
That made China the largest buyer of US pork in the first two weeks of April, exceeding the purchases of the traditional largest buyers, Mexico and South Korea.
But one official at a Chinese state-owned pork trading company, who declined to be identified, said the sheer size of Chinese pork demand is just too big for any other country to fill.
“For instance, the whole output of Denmark is just about equal to that of a single county in China,” the official said.
Regions other than the US will also hope to capitalize on China’s misfortune.
The EU provided 63% of China’s pork imports last year, according to the USDA, while the share of Brazil’s pork exports going to China increased from 4% in 2017 to 13% in 2018.
China bought the biggest pig producer in the US. Smithfield
If one were to wage a shadow war on a country, attacking their food supply would be one way to devastate them...
I am a bit surprised that pork has surpassed fish as the #1 source of meat for most Chinese. Unless fish isn’t considered “meat”.
The Muslims are REALLY going to consider the Chinese as heathens...
Smithfield IS paying the tariffs, and...:
More info. here.
Wow... I’ll bet this is why pork prices have seemed to increase here in the US somewhat, recently. Have our total export levels decreased since the China trade dustup began? It is, after all, a “global” market in many respects.
Maybe I should work on my catfish recipe to make it come out more like pork! I think it might be doable, at least with fish from good water...
But more sinister threats evolve from the economic disruption caused by ASF. Just this past March, the USDA and the U.S. Customs and Border Protection agency intercepted more than 50 shipping containers loaded with approximately one million pounds of pork from China. The meat had been mislabeled and hidden among other products entering the Port of New York/Newark. Indeed, pork and pork products are a known vehicle for transmitting this virus and could introduce it to the U.S.
I'd say this warrants extremely harsh action to ban any possible import of Chinese pork. If they don't like it, tough!
Also stated is that the virus is in North Korea now, with VERY little hope of any effective action against it, there. The Norks may be in even more trouble than I thought. (Poor harvest, and the pigs almost all die, too?)
My most recent Journal of the American Veterinary Association predicts that African Swine Fever will enter the US market and infect swine here within the near future. The disease is too infectious and our borders too sieve like for it to be stopped.
RE: Wow... I’ll bet this is why pork prices have seemed to increase here in the US somewhat, recently
Pork too expensive? Switch to beef, chicken,lamb or fish. The Jews and Muslims survived thousands of years without eating pork.
I would be surprised if it were true of the Japanese, but not the Chinese. The interior populations have been expanding over the years with some forced relocations and attempts to further develop those areas in comparison to the coastal regions where everyone is packed in. With it the pork consumption has increased as well.
I did not say that. Even with the increases, it is still a good deal vs. beef. But, we do eat quite a bit of chicken (and have our own small flock for plenty of eggs), and I like to fish, so...
THAT is worrisome. Guess we’d better get cracking on those genetically resistant hogs!
Noted. Good info - thanks.
Still, I was surprised that (before this virus) the Chinese had, literally, over 3x the number of hogs as the US. Most of the pigs dieing of this disease would have to be a huge shock to their food supply system.
Just this past March, the USDA and the U.S. Customs and Border Protection agency intercepted more than 50 shipping containers loaded with approximately one million pounds of pork from China. The meat had been mislabeled and hidden among other products entering the Port of New York/Newark. Indeed, pork and pork products are a known vehicle for transmitting this virus and could introduce it to the U.S.
And yesterday(?) their trade rep insisted they are trustworthy. We ought to stick a plateful of, shall we say, really ripe diseased hog meat in his **** face, figuratively if not literally, with LOTS of media around.
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