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What is the most recent issue in the pork industry?
African Swine Fever (ASF) has been one of the most pressing issues in the pork industry with China suffered greatly from the disease back in 2018. Cases of ASF in Germany recently have been the most pressing as China banned the import of pork from Germany on September 12, following a case of African swine fever in a wild boar in the Eastern state of Brandenburg last week. The ban takes effect immediately, meaning that any exports that are already shipped will be sent back or destroyed. Currently, South Korea, China, the Philippines, and Japan have all banned imports of German pork following a case of ASF in the Eastern state of Brandenburg along the border with Poland. Japanese imports of German pork amounted to 40.24K MT in 2019, accounting for 3.3% of the country s total imports.
The ban came two days before talks between Chinese President Xi Jinping, German Chancellor Angela Merkel, and EU officials were scheduled surrounding trade issues between the EU and China. Some analysts have speculated that the ban stems from political concerns more than it has to do with the disease as a display of the country s coercive diplomacy tactics. Prior to the ban, there had been evident disapproval from Chinese Foreign Minister Wang Yi on remarks from European officials including German Foreign Minister Heiko Maas's criticism of the national security law imposed in Hong Kong. Currently, the German Ministry of Agriculture has said it is in talks with the Chinese government to try to have the ban impact imports only from regions affected by the disease.
The ban also comes after the largest pork producer China has had its own difficulties with ASF and experienced a subsequent 20% drop in production during the first four months of 2020. It is estimated that China’s pig population has decreased by approximately one-third compared to the period before ASF was introduced into the country in 2018. Subsequently, German pork exports to China were at 158K MT worth USD 501.6 million during the first four months of 2020, a 50% increase compared to the same period in 2019 (volume). Approximately 14% of pork imports in China are from Germany. This provides an opportunity for other major producing countries such as the US, Canada, Spain, and Brazil to expand on exports to China. The US pork industry in particular is in an advantageous position with the Phase One trade deal guaranteeing increases of USD 200 billion in export value for the next two years, including agricultural products. Lean hog futures in the US rose late last week in anticipation of the ban.
However, according to US thinktank PIIE, China’s imports of US agricultural products until July amounted to USD 9.9 billion out of the yearly target of USD 36.6 billion, prompting uncertainties in the fulfillment of the agreement despite China’s “promise” to follow on the Phase One deal in mid-August. In addition, as it takes approximately 10 months for the pigs to be fully marketable, increasing the supply promptly in time might prove to be difficult. Nevertheless, several exporters have expressed their willingness to increase exports to China. International director of porcine trade body Daniel de Miguel has started last Friday that its white pig sector is “fully prepared to continue its growth trend in sales of safe and quality pork products to the Chinese market” while the US has announced it is “well-positioned” to export more pork to China.
How does the pork production process work?
Strict sanitary regulations have led to the closure of small, traditional slaughterhouses, leading to increases in larger organizations such as big Integrated Management Systems and Independent Livestock Associations.
The use of data analysis to improve the productive days of sows has had a positive impact on the number of piglets. Selecting breeding is practiced to improve the yield of heads. Artificial insemination is practiced along with breeding selection to improve the production cycles.
Piglet Production Improvements in sanitary control of farms have been key to reducing deaths, increasing production at the same time. Lactation lasts for 3-4 weeks before the piglets are transferred to the fattening phase.
Depending on the fattening phase, pigs are classified in terms of weight: S1, S2, and S3. Pigs aimed at the curated meat market have a strict diet that increases the level of fat and specific nutrients in the meat.
Which country is the largest consumption market for pork?
China is both the largest producer and consumer of pork, and hardly any of the products produced domestically are meant for the export market as the country takes up 50% of worldwide consumption. Imports of pork in China for 2020 rose greatly compared to 2019 with July imports amounting to 430K tons, a 7.5% increase from June and a 135.97% increase from the same period last year. As of currently, China has released its reserve pork stock in the market 30 times at an accumulated volume of 520K tons (an average of once per week).
What is the price trend for pork in China in 2020?
With schools back in session, the demand for pork products in school meals has been rising, as well as the anticipation of increased consumption during the holiday season from October 1 to 8 which could potentially exert upward pressure on prices. There is, however, also an expected increase in supply as suppliers tend to release their stock toward the holidays, creating possible fluctuations in prices.
Domestic pork prices in China have been on an increasing trend for the last two years, a trend that is in line with the ASF outbreak. Prices of fresh pork in China saw great fluctuations in August but ultimately went on a downward trend. The average price of fresh pork throughout the month was at approximately CNY 37.27 (USD 5.5), a 0.29% drop from July (CNY 37.38, USD 5.53).
The main reason for this trend is the increase in prices during mid-August, attributed to the nationwide flood which made it difficult for manufacturers to purchase live hogs and drove up prices. High prices reduced consumption which in turn decreased the price toward late August. By the end of the month, pork prices saw a slight increase from the low point as more producers were hesitant to sell the pigs at the current price.
Are there any other major North American pork exporting countries?
Canada is the world’s 6th largest exporter of pork.
New barns, improved fertility, and reduced morbidity will contribute to an expanded swineherd in 2020 and hence an increase in exports. Canadian pork prices saw prices similar to the US products but witnessed a higher peak of USD 2.91/KG in January. Exports for April were up 17% in terms of value and volume.
Production
The majority of pigs in Canada are raised in indoor barns where the producer can control the feed, temperature, lighting, and ventilation. Females will normally have anywhere from 11 to 13 pigs per litter. With a sow being able to farrow close to three times a year, one sow can have around 36 piglets in one year. This makes it possible for pork production to occur year-round. Virtually all commercial pork production in Canada takes place in a controlled environment which implies that, at all times of the year, animals are kept in buildings specialized for farrowing and growing. The most common hog production unit today is a specialized farrow-to-finish operation of 200 to 250 sows, which can be managed efficiently by a single family.
Farrow-to-finish significantly reduces productivity losses associated with the stress of movement, adaptation to new environments, changing feed regimes, and transmission of diseases. In addition, producers can effectively monitor the performance of animals until they reach maturity. A strong infrastructure is in place and working in Canada to coordinate the ongoing program of swine improvement. In 1984, Canada introduced sow productivity and management systems and for the last three years, sow productivity improved 11 % compared to many other leading pork-producing countries (1% to 2%).
Pork Industry in Canada
Canadian pork is usually offered for sale in the form of primal cuts, generally consisting of the butt, picnic, belly, loin, and leg. It is usually leaner than U.S. pork and the Canadian style of cutting differs somewhat from the U.S., particularly in the loin and shoulder cuts. A Canadian Pork Buyers' Manual can provide detailed information as to trimming and more specialized cuts.
Approximately 50% of all Canadian pork is further processed into cooked and cured products. Canada’s competitive pork prices and advanced processing technology make it possible to efficiently produce bacon, ham, and sausage products, in addition to the development of a wide variety of specialty pork products.
Canadian pork products are usually sourced directly from packers or through one of several experienced trading houses. The product is usually offered at the East or West Coasts, which are both well-serviced with refrigerated container service. For North American consumers, the product is generally offered in refrigerated truckload lots.
Chilled or frozen pork is normally offered in trucks or container lots, weighing approximately 18MT. The usual practice is for products to be quoted for prompt or nearby shipments in single or multiple load quantities. Long-term, fixed pricing is not common as there are no export subsidy programs.
In order to increase domestic pork consumption, the Canadian pork industry has recently implemented a marketing strategy that allows suppliers to directly reach consumers through advertising and recipe dissemination, and indirectly via influential channels such as the media, health professionals, retail, and foodservice sector. The campaign stresses the leanness, wholesomeness, and versatility of Canadian pork. At the retail level, programs have been developed to increase the number and variety of pork cuts, particularly new value-added cuts. New presentation and merchandising techniques have also been implemented which significantly increase pork sales and profitability.
Related Trade Agreements Canada has several free trade agreements with countries around the world. Issues or potential trade issues affecting the pork industry are as follows: the renegotiation of the North American Free Trade (NAFTA) agreement which was held in November 2018 (USMCA) effective July 2020 and the US's tariff war with both Mexico and China which had negative effects on the Canadian pork industry.
Export Trends
Canada has well-established agriculture and agri-food industry with long-standing success in the global marketplace. Pork production is a vital component of Canada's agricultural economy (CAD 24 billion). Canada has an advantage in producing pork with its stable grain production, allowing for selective, controlled feeding and reasonable feed costs. Canada enjoys a good reputation for its pork products with the quality of the products determined by whether it is lean, high-yielding, wholesome, and meets buyers' specifications.
In April 2019, the Minister of Agriculture and Agri-Food announced an investment of over CAD 6 million to help the Canadian pork industry harness innovation to boost production, strengthen public trust, and expand markets for Canadian pork domestically and internationally. In 2018, Canada’s pork exports amounted to over CAD 4B (USD 3.04) with the top pork export markets being Japan, the United States, China, Mexico, and South Korea.
The main exporting countries for Canada are Japan, the US, China, Mexico, and South Korea. China is a very important market for Canadian producers. In 2018, Canada’s pork exports were almost CAD 4 billion, of which CAD 514 million was exported to China, making it our third-largest export market. Between January and November 2019, 255,290 MT of Canadian pork was shipped to China, worth CAD 507,200,488. Currently, exports to China are up 44% YTD.
Alternate market opportunities in Asia are expected to support sustained export growth as well as expansions in exports to Japan and South Korea. As ASF continues to impact the region, demand from Asia will support increased pork exports in 2020 and supplement the deficit created by a loss of local production.
The Comprehensive and Progressive Transpacific Partnership (CPTPP) entered into effect for Canada, Australia, Japan, Mexico, New Zealand, and Singapore on December 30, 2018. Japan was also one of the first six to ratify the CPTPP and Canadian pork exports have subsequently seen two tariff reductions to the country. The ad valorem duty will fall from 2.2 percent to 1.9 percent on April 1, 2019, and will eventually reach zero in 2027. The EU market for Canadian pork has seen slow growth since the CETA implementation but, as marketing efforts progress and resolutions for non-tariff barriers are reached, it is expected to continue growing in 2020. Vietnam ratified CPTPP in January 2019 with tariffs being eliminated for fresh/chilled and frozen pork within nine years. The United States continues to be the dominant export market for Canadian beef and pork products. Canadian exports of feeder swine to the United States will increase slightly following the 2019 decline as a result of the Porcine Epidemic Diarrhea Virus (PEDv). In addition, the recent United States-Mexico Canada Agreement will have Canada working towards expanding its exports to Mexico as well.
Which country is the most prominent exporter of pork in South America?
Brazil is the third-largest producer of pork and the 7th-largest exporter.
Production
Brazil produced 3,856.65 MT of pork in the year 2019 and was ranked the world's third-largest producer of pork. Pork production is forecasted to set another record in 2020 at nearly 4.2M MT, an increase of 4.5% from last year. The increasing production is an outcome of record pork exports and growth in domestic demand. The main producing states were Santa Catarina (29.59%), Paraná (19.85%), and the Rio Grande do Sul (19.26%). All of them are part of the Southern region, which contains around 68% of Brazilian pork production. Brazilian prices have remained the lowest of the key exporters, and have recently experienced a sharp fall (-9% from the end of 2019).
Export Trends
Pork exports are expected to increase by 15% in 2020 due to the impact of African Swine Fever (ASF) in China, Vietnam, and other parts of the world. Brazil’s pork exports rose by 28.4% in the first 4 months of 2020, despite the effects of the pandemic. Between January and April 2020, the sector shipped 280.8K MT of pork, compared to 218.7 MT in the same period in 2019. Trade sources foresee a continued increase in pork exports to China and Hong Kong in 2020, despite earlier COVID-19 troubles in China. From January to February of 2020, pork exports increased by over 41%, based on volumes exported daily, as compared to the same period in 2019. Brazilian pork packers believe that China will reach the peak of pork imports in 2020 and then stabilize in 2021.
Export Trends in 2020
Brazilian pork exporters are focusing on markets other than China to expand exports and decrease their dependence on the country. The outbreak of ASF in China and in several other countries has prompted Brazilian pork exporters to focus on exports to several Asian countries, such as Japan, South Korea, Singapore, and Vietnam. Brazilian exporters and government officials are also engaging in market promotion in Angola, Chile, and South Africa. Currently, large Brazilian packers are investing in pork production capacity to meet the world demand for pork. The outbreak of African Swine Fever (ASF) in China and other parts of Asia will continue to raise international demand for pork from other countries. Brazil is currently facing a unique situation in supplying pork to the world without any major sanitary issues and has taken significant steps forward in the sanitary status of the swine industry. A combination of a devalued Brazilian currency and expected stable domestic prices will likely keep Brazilian pork export prices competitive in the world market.
Which country is the largest pork exporter?
The biggest exporting country of pork was Spain in 2020, with an export value of 36.5B. Spain was followed by the United States, Germany, Canada, and Denmark.
Export Trends in 2019/2020
In July 2020, US pork exports decreased by 5% (222K MT) in volume and decreased by a 12% decrease in value (USD 548.3 million) compared to the same period in 2019. Export prices, however, were still higher than recent lows in June. From January to July 2020, US pork exports amounted to 1.78M MT, which was a 20% increase in terms of volume and a 22% increase in export value, at USD 4.6B from last year.
Export prices of pork in July were at USD 48.85, a decrease of 17% compared to the same period last year. However, the average export price from January to July saw a 20% increase from the same period in 2019 at USD 61.40 compared to the same period in 2019. Weekly export sales also reveal that demand from China will remain steady throughout the year. In fact, the recent ban on German pork imports by China and several other Asian countries such as South Korea, Japan, and the Philippines is expected to work in favor of the US.
How is pork graded?
US
Pork is not graded by USDA grades. The quality of pork is determined by the color, texture, and marbling by visual examination as well as tests such as measuring the PH level and backfat thickness, and carcass muscling (lean quality).
Europe
The pork carcass classification system was introduced to the EU in 1984. The evaluation is based on computer technology that involves the use of needle measurements of backfat thickness and lean meat content. Pork imported from Europe is marked with a letter that signifies the class.
What is the pork export process like?
China
A standard business license is typically issued by municipal Administrations of Industry and Commerce. Distribution rights for these industries are often approved by a higher-level authority. The Ministry of Agriculture of the People's Republic of China helps work out development strategies, programs, and plans for the marketing and promotion of agricultural products. An agency, markets, locating the customers, building & developing sales leads, negotiate & close sales order, but does not own stocks. Only coordinates for customer delivery directly from the source or through a distributor. A distributor buys product stocks, manages inventory, services customer orders, executes and affects deliveries, collects payments, but owns and maintains the stock.
Spain
The traceability of each animal is obligatory for the entire chain. The pig goes through three different processes depending on its purpose: maternity, gestation, fattening. From the farms, pigs are transported to slaughterhouses and, according to the market, processed into the final product.
From slaughterhouses, products can be transported to other facilities for further process or packaged for commercialization. Traditional market channels such as wholesale markets are widely used to commercialize fresh, frozen, and processed products. These are then transported and commercialized in local shops and small chains. Large chains and modern logistic and distribution platforms are used for mass consumption and export markets. Agents can be used to connect overseas importers. These are mainly used by Collectives and Associations, whereas supermarket chains have their own logistics platforms.
Are there any trade agreements that affect the export of Vietnamese pork?
The Vietnamese government encourages exports by reducing export tax on most goods to 0% (except for special goods such as minerals or forest products) including the export of pork. Thus, pork exported from Vietnam has a 0% export tax, but value-added tax and an import tax may still be applied for its respective import destinations. Below is the list of trade agreements and the agreed-upon import taxes.
ASEAN - Japan Comprehensive Economic Partnership Agreement (AJCEP), 9.00%. Vietnam - Japan Economic Partnership Agreement (VJEPA), 11.00%.
ASEAN - China FTA (ACFTA), 0.00%.
ASEAN - Korea FTA (AKFTA), 0.00%.
ASEAN - India FTA (AIFTA), 10.00%.
ASEAN - Australia - New Zealand FTA (AANZFTA), 3.00%.
Vietnam - Chile FTA (VCFTA), 18.00% (for fresh or chilled) / 15.00% (for frozen carcasses and half-carcasses) / 14.00% (for frozen hams, shoulders and cuts thereof, with bone in) / 11.00% (for other frozen products)
Vietnam - Korea FTA (VKFTA), 0.00%.
Vietnam - EAEU FTA (VN-EAEU FTA), 3.00% (for fresh or chilled) / 2.50% (for frozen products).
ASEAN Trade in Goods Agreement (ATIGA), 0.00%.
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