The supply and production challenge has begun in earnest with weekly hog slaughter for the week ending Oct. 19 record large at 2.589 million pigs. Daily slaughter is now running at peak levels with several consecutive days at 477,000, record high daily kills. The industry is in the process of expanding slaughter capacity and by the end of next year the industry should be capable to killing and processing 500,000 pigs per day, if necessary. This is not a surprise. In fact, it’s actually a positive development in that hog supplies are not in danger of being backed up severely during the peak all-production period.
While the United States is smack in the middle of a trade war with China, other areas of trade concerning the pork market are looking positive. The United States has successfully forged a new North American Free Trade Agreement with Mexico and Canada. The United States is about to begin talks with Japan after recently signing an agreement with South. Korea. In addition, the Trump administration is in the process of early negotiations with the European Union and United Kingdom regarding pork trade. These all appear to be positive developments.
U.S. pork exports in August were up nearly 5% compared to August of last year. This impressive trade occurred despite tariffs on U.S. pork by Mexico and China. Exports to Mexico, our largest export customer, were down 5% during the month. Exports were up 7% to Japan, up 9% to Canada and surged higher by nearly 30% to South Korea. Pork exports during August to Australia, Colombia, the Dominican Republic, the Philippines and to Chile were all sharply higher than August of last year. The big hit in export business was to China/Hong Kong which saw pork exports decline by 35% compared to last year.
U.S. pork producers represent low-cost/high-quality production and export potential is expected to continue to grow in the months ahead. Total pork exports this year are projected to be 5.989 billion pounds, up 6.3% from last year. Export projections for next year are pegged at 6.2 billion pounds, up 3.5% from projections for this year. The export projection for next year would be up 10% from exports achieved in 2017. Clearly, an impressively growing and developing trend.
African swine fever continues to spread in China with more than 40 cases now reported since it was first reported in early August. That’s an average of about one new case every two days. The disease has spread to 11 different provinces. Just recently, ASF was detected in a large commercial operation. We have no way of knowing how many pigs have been exposed to this disease, but we do believe more than 200,000 pigs have been culled to date. Recent reports indicate the disease is spreading from the northeast into the Southwest part of the country which enhances the danger. Sichuan and Guangxi provinces, located in the southwest, are major pork-producing regions. The latest data available, from 2016, confirms that Sichuan province slaughtered 69 million pigs and Guangxi province killed 33 million pigs in 2016. Aggressive expansion has been occurring over the last year in Guangxi province. Two new cases were just reported in Yunnan province.
If ASF continues to spread in China, and we believe that it likely will, at some point the Chinese will have to begin importing vastly larger quantities of pork. These import needs will mostly derive from the EU and from the United States. China has a total population of over 1.5 billion people. Pork is a staple in China. In fact, the Chinese consume about 87 pounds of pork per capita compared to 53 pounds for U.S. citizens. Put in a different light; China houses well over half of all the pigs in the world and the Chinese consume more pork than the rest of the world combined. Finally, the Chinese government cannot and will not let pork become in short supply. If large scale shortages develop, price will be a secondary factor. Tariffs won’t matter. Pork, large quantities of pork, will be imported if ASF continues to spread and decimates the hog population in China. Simply put, if this occurs, there won’t be enough pork in the world.
Source : NationalHogFarmer