Is the Global Pork Trade Up for Grabs?
Any time China’s economy receives a shock, the world prepares to feel the shockwave. Two major events recently shook China’s meat market: African Swine Fever (ASF) and COVID-19. Likewise, the United States (US) meat market suffered a shortage, right as it was accelerating exports to China. Rapid developments in the world meat market have changed the game significantly. Who will step in to take advantage of these changes remains to be seen.
Since August 2019, China’s pig farms have experienced hundreds of ASF outbreaks, forcing the culling of at least one million pigs. While the ASF virus does not affect humans or other animals, it spreads rapidly between pigs, and acute cases almost always lead to death. Naturally, such outbreaks decimate a country’s swine population, and make pork production more difficult. Since its ASF outbreak began, China has lost over half of its total pig population. Soaring pork prices, resulting from the drop in supply, have created a serious need for pork imports in China. The US, which agreed to ramp up pork exports to China as per Phase 1 of their bilateral trade deal, has been obligated to satisfy China’s rising demands. COVID outbreaks in US meat-packing and poultry plants have forced many of them to close, with over 16,000 employees infected (as of July 2020). US supplies of pork were down about 25% year-on-year in June 2020—although production has slowly resumed, as US COVID cases have become somewhat under control. Still, the US supply will remain low for the longer term.
As a result, the US may not be able to export meat and poultry products at the rates it was previously. This is already becoming evident. In July 2020, total world pork exports came in at 190,248 metric tons, compared to 243,593 metric tons in March. It seems as though the US will struggle to meet the increasing demand for pork worldwide for the rest of this year. The fall in domestic supply means US pork-processing plants could fall short of the national demand, with US grocers already seeing rising pork prices.
The decline of the world’s two main pork producers (the US and China) means other countries will be called upon to increase their exports. Accordingly, other top producers, like Spain and Germany, will likely grow their market shares in struggling areas (like the US and China) and emerging markets (such as those in Southeast Asia and Sub-Saharan Africa). For example, the Philippines, another country affected by ASF, saw pork imports increase 26% in 2019.
ASF and COVID remain stubborn obstacles, though. For instance, Germany recently saw its pork exports banned in several countries after just one case of ASF was reported—including in Japan, one of the largest pork importers on the planet. As the world awaits further developments in Germany, it joins the US and China among major industry players now limited in their ability to export pork. Additionally, China significantly reduced pork imports from Brazil (which exported 750,000 tons of pork to China in 2019), citing COVID outbreaks at several Brazilian meat plants. Pork imported from the Netherlands (which exported 299,000 tons to China in 2019) also faced cutbacks from China.
As the major players in the pork trade endure setback after setback, a few countries remain strong, with the potential for expansion. Spain, the largest European Union (EU) pork exporter to non-EU countries, has not suffered plant closures due to COVID. Spain has also not had to contend with ASF yet. As a result, Spain has not faced any cutbacks from its trading partners. Although Spain’s COVID-induced lockdowns have limited its hospitality sector, and decimated domestic pork demand, the pork industry’s operations within Spain remain largely unaffected. In fact, the fall in pork prices within Spain has helped accelerate exports to Asia.
According to the US Foreign Agricultural Service (FAS), the first quarter of 2020 saw a 12% increase in pork exports from Spain to China. While China has imposed restrictions on much of the EU and South America, 8 Spanish pork exporters received approvals in April from the Chinese government. This brings the total number of approved Spanish pork exporters in China to 57—one of which will “soon be the largest pork processing facility in Europe (with 30,000 pigs slaughtered per day).” ASF remains a major concern for Spanish regulators and industry leaders. The pork trade’s continued success in the COVID era provides additional incentives for its preservation, expansion, and protection from ASF. Regardless of where the meat goes, it is clear that Spain wants to ramp up its commitment to exporting pork.
Interestingly, the FAS cites the US and Canada as Spain’s main competitors for Asian markets. It specifically cites the lower prices offered by North America as a potential threat to Spanish expansion. However, the US has struggled to improve pork production through the summer, and limited supplies continue to push prices higher. Spain, on the other hand, continues to expand its capacity for pork production. If the US market remains too difficult to achieve meaningful growth in, Spain’s pork industry (mostly due to lower prices) may let its eye wander beyond China in search of other opportunities. As mentioned earlier, the Philippines increased pork imports substantially in 2019. Its largest supplier, Spain, accounted for about 36% of these imports. The Philippines recently approved Spanish beef imports (which had previously not been allowed), along with pork, from now until 2023. Naturally, the Spanish influence on Filipino food encourages agri-food trade between the two, which in 2019 was valued at a record €328.6 million. Clearly, Spain has capitalized on the destabilization of the global pork trade by growing its potential and presence in Asia.
Spain is a consummate example of how a “middle player” can expand and find opportunities when traditional powerhouses are shaken up. The effects of COVID and ASF on the world have given Spanish pork producers a chance to adapt for the better, which they have. Spain is just one of a plethora of countries seizing the day in our “new world.”
Jameson Ayers is an intern at M74 from New Jersey. He studies Economics at Fordham University in New York City. His interests include financial technology and its effects on behavioral economics.
The views expressed above are those of the author and do not reflect the official position of the M74 Group, which remains neutral on all matters. Publishers assume no liability for content.