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Europe could replace American pork exports in the Chinese market. Can Spain take the lead?

Pork

The trade war started between Washington and Beijing is going to add a 25% tariff on American pork, among other food products, and Europe could benefit from this situation, as an AHDB analyst thinks.

Posted on Apr 20 ,06:37

In 2017, China imported 1.2 million tonnes of pig meat, with around 65% of this coming from the EU, and 14% from the US, according to data from China Customs. The US is the third largest exporter of pig meat to China. From a US point
of view, China is the fifth largest destination of pig meat exports receiving 7.5% (185,000 tonnes product weight) of all US fresh/ frozen pork exports in 2017, equivalent to about 1.5% of the 11.7 million tonnes (carcase weight) of US production.
“In 2017, China produced 53.5 million tonnes of pig meat and consumed 55 million tonnes, according to the USDA. With that underlying demand, China may, therefore, need to source at least some replacement product from the global market, including the EU.”, claims AHDB Pork analyst Rebecca Oborne.
EU’s pig herd is about 150 million head, with the largest livestock located in Spain, and the exports to China have already reached 800,000 tons in 2017, according to HIS Maritime and Trade-Global Trade Atlas and the Chinese Customs
Agency.
Looking for bigger hogs
The Spanish pig sector looks strong enough to respond to an increase in demand from the foreign markets, as shows a
Genesus report drawn by Mercedes Vega, General Director for Spain, Italy & Portugal.
„It is observed in the market that trends are changing. On the one hand, the enlargements of the slaughterhouses
are already working, they need more hogs to be slaughtered and, in addition, they are looking for bigger hogs.
The average slaughter weight of last year, 2017, was 109.6 kg, compared to 107.6 kg in 2015. But if we look at the average of what we have in 2018, it is 115.2 kg compared to the same period of the previous year. 2017 of 111.2 kg. The change is appreciated little by little. The market trend is the demand for heavier hogs and better meat quality”,
mentioned Vega in the report.
Exports on the rise
For the last 5 years, the evolution of Spanish exports registered a growth of 59.2% in volume and 50.8% in value and
in 2017, Spanish pork exports reached a volume of 2,124,367 tons valued at 5,022.6 million euros. That represents an increase of 5.3% in volume and 11.8% in value compared to 2016. China already accounts for more than 15% in the Spanish pork exports, other important markets being represented by France 15.38%, Italy 8.33%, Portugal 6.25%, Japan 5.51%, UK 3.35%, Germany 3.23%, and Hong Kong 2.62%.
At this time, 40% of the EU’s pig production is concentrated in two countries: Spain (30.1 million pigs) and Germany (27.6 million pigs) but the German market has shown a decrease in pig consumption last year due to a new preference manifested by the consumers for the beef.
If the trend manifested on the German market is to continue, a slight proportion of the Spanish exports to this market could be redirected outside the EU, China representing the opportunity of the moment.
US producers to look for new markets
Even is at a point where it could lose ground on the Chinese market, the American pork industry should not express too
many worries about the tariffs imposed by Beijing, believes Jim Long, President and CEO of Genesus Inc.
„China’s imports from the USA is to be at approximately 2.2 % of the total US pork production. The emotional reaction in our mind is far more dramatic them the reality of market share. China’s small percentage of market share will be filled by other players, but this turn could open opportunities for US pork in other markets”, said Long in its own
report on the global market.
Same coin, two sides of it
Regarding the subject of the US-Chinese trade war, Rabobank analysts expect to be felt on both sides. For the moment, the US pork producers and the Chinese consumers are to pay the price in this dispute. A $0.14 dollars decrease in prices for a kilo of pork carcass was reported at the begining of April in the US, but China has also a price to pay
before it can declare itself free of the American influence in agrifood trade sector.
Rabobank estimates that a 25% import levy on soybeans increases the average cost price of Chinese pork with 2.3% and
that of poultry with 3.8%. It is likely that, initially, these cost price increases will be passed on to the consumer. In 2016, China slaughtered 683m pigs, which together ate 218m tonnes of feed containing on average 16% soymeal. Feed costs represented 57% of the cost price of Chinese pigs. However, soymeal inclusion in feed used in professional
pig production can run as high as 25%, increasing the cost price by 3.7%. The inclusion of soymeal in broiler diets is 25% while feed costs are estimated to represent 60% of the total cost price of Chinese broilers, mentions the latest Rabobank report on this subject.

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