China’s pig cull could benefit KZN beef and chicken farmers

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Already several supermarkets have run out of these products and this is only likely to get worse as China extends its cull.

The Dutch bank, Rabobank, estimates that as much as half of China’s 400 million pig population may be culled as the authorities have so far failed to curb the spread of African swine fever (ASF), which has now spread to the neighbouring countries of Mongolia and Vietnam, and then from them into Cambodia and Laos.

ASF, which is fatal to pigs, but harmless to humans, showed up in north-east China in August 2018, following outbreaks in Siberia in the summer of 2017.

Part of the reason for the fever’s rapid spread in China may have been a poorly designed compensation scheme. When the disease first appeared, authorities ordered herds to be culled and, in an effort to ensure farmers reported outbreaks, ordered payments of CHY 1,200 (R2 560) a head for those who lost animals.

However, cash-strapped local governments delayed payments so farmers preferred to sell their herds as soon as one pig fell ill, rather than report outbreaks and risk a cash flow crisis.

China, which produces about half the world’s pork, said recently it had culled just more than 1 million pigs to control the disease. It has reported 124 outbreaks since August last year, with the virus having reached every province apart from the southern island of Hainan.

Rabobank expect China’s pork production to drop by around 30% or 16 million tonnes to some 38 million tonnes this year compared with 54 million tonnes last year. That would be the lowest level in at least 20 years, according to Chinese National Bureau of Statistics data. To put that into context, the 16 million tonnes that would need to be replaced by other animal or vegetable protein would be nearly 30% larger than annual output in the US and equivalent to Europe’s entire annual pork supply.

Domestic Chinese production and imports of other animal proteins like poultry, beef, mutton and seafood will also increase to partially close the gap, which is why KZN beef and chicken farmers will benefit, as prices of these commodities rise, while at the same time, animal feed prices for things such as soya bean will drop as there will be less demand from China.

Gert Blignaut, the chief operations Officer at Beefmaster Group, who returned from China recently the outbreak created an opportunity for the South African beef industry, provided that the country’s foot and mouth (FMD) disease-free status is restored so that China resumes beef imports from South Africa.

China recently announced that it would resume the imports of hides, livestock skins and wool from South Africa, following a suspension on these and all beef products imports from us because of an outbreak of FMD earlier this year.

“This is a step in the right direction, but we need to regain our FMD-free status to avoid further delays, which could have negative consequences on our economy and the beef industry if not restored soon,” Blignaut said.

“It would be positive for the South African economy to yet again get a slice of the pie when it comes to the export of beef products,” he said.

Research suggests that the Chinese meat industry is booming, with more than 1 million metric tons of meat imported to the country in 2018, making it the world’s largest market for beef products and the ASF outbreak could lead to a doubling or tripling in this amount.

Within the Chinese agricultural market, South Africa remains a small player, although its share has grown over the past 18 years, according to Wandile Sihlobo, the economist at the Agricultural Business Council. The value of South Africa’s agricultural exports increased 26-fold between 2001 and 2018 to $676 million, but as China’s market is so huge, South African farm exports only had a 0.5% share of the value of China’s agricultural imports in 2018.

The United Nations’ Food and Agricultural Organisation noted in its May food outlook report that while developments in China’s agriculture do not always percolate fully into global markets, ASF impacts are likely to be different as China accounts for half the global pork production. In their view, the effect of ASF will be felt around the world as pork is the preferred meat in China. For this reason, demand does not always respond directly to changes in prices, which may see a sustained increase as a result.