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Who’s bringing China its bacon now that it’s running low?

August 12, 2019

A worldwide pork deficit is impending and one virus is to blame. But who’s going to fill in the gaps? Meat giant Tyson’s latest earnings reveal it’s not them, with the US-China trade war largely to blame. Could they lose out to alternatives like Impossible Foods?

Though harmless to humans, African Swine Fever (ASF) has the world’s top pork producer China reeling. Pork production is down 5.5% year-on-year and prices on China’s most popular meat are up 25%. Rabobank also predicts that China’s pig herd could halve by the end of 2019. But farmers worldwide are yet to jump in to fill the supply. Why? Tariffs, supply concerns and a lack of a route to market are holding many major players back.

In major US meat business Tyson’s latest earnings report, the company said it had yet to reap profits from the massive dip in China’s pork production. That slump began last September after mass cullings following the country’s first-ever swine fever outbreak. And with President Donald Trump’s latest tariffs in place, US pork entering China now faces a 62% levy, making it too expensive for consumers there. The nail-biting back-and-forth between the two superpowers as they thrash out their trade war adds to the uncertainty and Tyson warned that the global pork situation was getting serious.

“Given the magnitude of the losses in China’s hog and pork supplies, the impending impact on global protein supply and demand fundamentals is likely to be a multi-year event,” said Noel White, Tyson’s president and chief executive. 

AFN has reached out to Tyson Foods and Chinese pork giant WH Group for additional comment. Do check back for updates.

Snapshot: China Fails to Bring Home the Bacon 

  • Pork production in H1 down 5.5% year-on-year to 24.7 mn tonnes
  • Local hog herd dwindled 15% from a year ago to 347.61 mn head
  • Average prices of pork up 25% to CNY17.8/kg in July v.s. end-May’s CNY14.2

Source: China’s National Bureau of Statistics

Chicken to the rescue… for now

With the Chinese getting deprived of their favorite meat, they are turning increasingly to chicken, beef and lamb, the statistic bureau’s June data showed. In response, Beijing has urged poultry producers to boost output to supplement the dip of their fellow white meat.

Australia’s pork industry association agrees with Tyson that China’s hog problems will last into the long-term and the repercussions are reverberating worldwide.

“The impact is already being felt across all protein and feed supply chains, and this will continue over the next 2-5 years and may be longer,” said a spokesperson from Australian Pork Limited (APL), adding that Australia’s robust biosecurity protocols will keep the virus from spreading to the island nation. 

“State and territory governments are currently implementing preparedness measures in the event that an ASF incursion occurs. Australian pork producers are reviewing their on-farm biosecurity and implementing enhanced requirements such as additional quarantine periods for foreign workers returning from visits to their home country.”

But local exporters, unfortunately, won’t be able to cash in on the undersupply, she added. “Australia does not currently have protocols to supply pork to China and remains largely unaffected by the Chinese demand.”

The APL added that China’s predicament is being made worse by trade tensions between China and Canada, as well as with the US.

So if US and neighboring Australia aren’t benefiting, who could?

It would seem only logical that the world’s number two in pork production would help step in, and analysts at Dutch bank Rabobank projected an increase in imports by China which would promote production expansion in the EU, Belgium and Eastern Europe are themselves still struggling to contain ASF outbreaks. Therefore analysts gave the outlook for Europe’s pork market a ‘mixed’ review amid the epidemic.

The APL predicted China’s demand for protein would be filled by the EU and Brazil and Rabobank is more positive about Brazil, calling 2019 a ‘promising’ year for the South American nation’s pork industry. Adding to the bullishness on Brazil is a report by Shanghai-based IQC Insights, which has found that Brazil benefited greatly from the ongoing trade war and ASF outbreak in China, with its pork export volume to China rising by 208.1 % year-on-year at the time of the report’s publication in March.

Looking closer to home, neighbouring countries like the Philippines have also expressed interest in upping pork exports to China, though there have been no official confirmations that producers have done so as of yet. In an article by the Philippine News Agency, the official news agency of the country’s government, Agriculture Secretary Emmanuel “Manny” Piñol said that Manila is “seriously looking at the possibility of exporting pork to China” as he foresaw that it would take years for the industry to recover. 

One closer neighbour, Thailand, however, is looking to not only cash in on the sharp drop in China’s pork supplies by starting exports to China, but also to other countries that import from the world’s top pork producer.

“We see a good opportunity for Thailand to ship more pork and gain more market share in other countries,” Pimchanok Vonkorpon, the Commerce Ministry’s director-general of trade policy and strategy, told Bloomberg in an interview. Vonkorpon added it would take some time for Thai producers to boost supply for exports.

But what about meat substitutes?

With indications making it clear this is likely to be a multi-year crisis for the pork industry, the timing is practically perfect for the burgeoning plant-based meat sector. Beyond Meat’s unbelievably popular IPO continues to hit the headlines as investors the world over bet on increasing demand from consumers. If any of the plant-based meat companies were to bring a pork substitute to China, that demand could spike more out of necessity than a desire to eat a more environmentally-friendly option. 

Speaking exclusively to AFN, Impossible Foods told us that China is ‘absolutely’ one of the countries they’re targeting next. This isn’t surprising after the company’s recent manufacturing agreement with OSI Group, a US food processor with a footprint across several Asian countries, including China. The plant-based beef company said they have yet to share timelines, strategy, or products for that planned expansion, but indicated that they were much more than just a plant-based burger business.

China is absolutely on our radar. Demand for meat is growing faster in Asia, especially China, than anywhere else on the planet — and satiating the continent’s demand has global implications,” the Impossible Foods spokesperson told us. “Impossible’s platform is designed to be able to create anything global consumers consume from animals today.”

“And while we want to make Impossible Foods’ products available everywhere, demand for meat is growing faster in Asia than anywhere else on the planet — and satiating the continent’s demand has global implications.”

Impossible Foods did not comment on the impact of the tit-for-tat tariffs on their decision to hold off on their expansion to China, although they could be subject to levies due to existing tariffs from China on US goods such as wheat and soybeans, which their products contain.

Snapshot: What is African Swine Fever?

  • A virus endemic to sub-Saharan Africa
  • Causes haemorrhagic fever with high mortality rates, with death possibly happening as quickly as a week
  • Does not cause disease in humans or in other animals
  • Outbreaks so far in Western, Northern and Eastern Europe, China and Vietnam
Is a vaccine or cure in sight?

Pig farmers worldwide are dealing with the spread of ASF by culling their herds as an effective cure or vaccine is still not readily available. China’s Xinhua News Agency reported in May that clinical trials have begun for a vaccine, however, with two candidates already proven in laboratory tests to offer immunity to the disease.

Elsewhere in Madrid, Dr. Jose Angel Barasona, a researcher at the VISAVET Health Surveillance Centre, has reportedly found a vaccine that immunized wild boar against a highly virulent strain of the fever. It is administered orally, with a 92% protection. But the researcher cautions more research is needed before it can be used widely.

The clock keeps ticking as scientists fight against time for a viable cure. Rabobank forecasts that China’s pig herd could halve by the end of 2019 year-on-year, with no surefire remedy yet on the horizon.

Could tech have prevented this?

I’m going to start an investigation into potential technologies that could be deployed to avoid another outbreak of this magnitude in future (please get in touch if you have ideas!), but here’s a quick look at some technologies currently used for cows that could perhaps be turned towards their fellow farm brethren.

One of AgFunder’s portfolio companies Connecterra has a software service for the dairy industry called Intelligent Dairy Farmers Assistant (Ida). Ida collects data from dairy cows that can detect health issues such as mastitis or lameness at least 24 hours before they are critical. Ida can also tell dairy farmers when cows are on heat and the best time for insemination as well as those that are having feeding issues including digestive disorders such as ketosis. Could technology like this be applied to pigs too? 

In Argentina, where our editor Louisa was last week, Uniagro is creating a suite of tools to help livestock farmers, including a computer vision solution that creates a heatmap of dairy cows to identify any health problems. The founders told Louisa that in theory this could be used in other species.

Irish startup Cainthus also uses computer vision to track dairy cows, and can monitor key activities such as food and water intake and behaviour patterns that could be key indicators of disease. 

There is also, of course, a wealth of potential for biotechnologies to not just treat viruses like ASF but also prevent them. 

Do you have or know a technology that could help? Please reach out [email protected]

Image credit: Wokandapix from Pixabay

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