Meatingplace caught up with Don Close, vice president of Food & Agribusiness Research & Advisory, Animal Protein at Rabo AgriFinance, to discuss recent developments on the trade front and what they mean for the protein markets in 2019.
What do the agreements between the United States and China over the weekend mean for protein trade?
CLOSE: On a short term basis, the first market they will target will most likely be soybeans, and that’s where [China’s] biggest shortage is. Then pork.
But with the 90-day window of this truce -- cold storage facilities in China are brim-full as they have been harvesting hogs as aggressively as possible to avoid African Swine Fever. So the time window [of the 90-day truce] to when they need product don’t align very well. It will probably be during the second half of 2019 that there are really substantial shortages of pork to China.
But the agreement eases tensions; it gives reasons for them to have discussions. I don’t know that there’s a lot more to the short-term agreement other than just buying time. … I think there’s a lot more to this story to evolve before it means resumption of trade.
How long is ASF likely to affect the Chinese market?
The number of reported sites infected to date are 80, or just under. There have been multiple thousands of hogs destroyed. While we are short of verification, there are widely held views that the number of ASF cases and locations are substantially worse that what has been reported.
Essentially the entire country is on some level of restricted shipments. The real uncertainty is a) what percentage of that half a billion hogs will they end up eradicating to get the disease under control, and b) what percentage of that ends up being breeding stock? The deeper they go into the breeding herd … then you’re talking a multiple-year scenario.
Once ASF takes hold in an area, does it ever really get eradicated?
Does it go away? That’s been debated. Given the difficulty of controlling ASF and the fact that 60 percent of China’s hogs are in backyard pens, they may never get it under control. And ASF might have started earlier than August [when the news first was announced] and there may be more cases than have been reported.
One other thing that’s really important on this one, we continuously try to make the connection with the behavior of ASF and with porcine reproductive and respiratory syndrome (PRRS). PRRS is an airborne virus and a rapidly morphing or changing virus so it moves quickly. [ASF] doesn’t move by air, it moves through contaminated feedstuffs or facilities or via contact, so it’s all playing out in slow motion. That’s tough to set a timeline to, because it’s way more damaging and way more slow-acting.
Did any other announcements out of the meetings in South America catch your attention?
CLOSE: I think the announcement about Argentina opening (to beef trade) — it’s not a big volume but it’s an interesting prospect. It shows progress on the bilateral trade agreement front.
Where we’re really needing to see progress is with Japan and with the tariff advantage that the TPP countries will be gaining over the U.S. There’s going to be another substantial, measurable reduction in the tariff rate from Australia to Japan as of Jan. 1.
Source : Meatingplace