The USDA’s Foreign Agriculture Service said in a report that African Swine Fever in China, coupled with its wide distribution, virulence and ease of transmission could have a significant effect on China’s swine population and the availability of domestically produced pork.
Chinese veterinary officials still are struggling to determine how the disease could pop up in locations that are hundreds of miles apart, according to news reports.
The Farm Journal quoted Iowa State University Economist Dermot Hayes saying that a similar outbreak in the US could mean $8 billion in direct losses to the pork industry in one year alone. This doesn’t include losses from other commodities like feed ingredients.
CHINA PORK PRODUCTION COULD GROW
Assuming (emphasis added) China controls the current outbreak, the FAS forecast 2018 pork production would increase to 55.2 million tonnes with imports decreasing to 1.2 million tonnes, a drop of 22%.
The FAS forecast 2019 sow beginning stocks at 45 million head, about a 1% year-on-year increase. This increase in forecast female herd size was driven mainly by the consolidation and expansion of large-scale operations seeking to expand their market share, despite weakened demand for pork.
In 2016 and 2017, when hog prices were at record levels, the large companies reaped large profits and now are seeking to grow in order to consolidate their market share. At least part of the aim may be to squeeze out smaller producers.
However, the increased supply will be outstrip consumer demand, the FAS said, leading to a further drop in pork prices next year. Pork consumption was expected to rise by 1.2% in 2019 to 56.1 million tonnes because pork remains the primary protein for China’s growing population.
RISING FEED COSTS TOP PRESSURE BREAKEVENS
Overall feed costs were expected to increase in 2019 amid rising corn and soybean meal prices, the FAS said. For swine farmers, a 20% price increase in soybean meal alone may increase the overall cost by 3%.
However, the increases in productivity from modernization and genetic improvement may offset the increase in feed costs, the FAS said.
2019 LIVE IMPORTS SEEN LOWER
The FAS forecast live swine imports into China to be down by 6,000 head in 2019, mainly because of slowing expansion and the outbreak of ASF in Europe, one of China’s main suppliers of swine for genetic improvement. China mainly imports swine genetics from the US, the EU and Canada.
Since the imposition of retaliatory tariffs against US food and agricultural products by China in July, US live swine imports have not yet been targeted for additional tariffs, the FAS said. In fact, imports of live swine in the first six months of this year were double the amount from the same time last year.
CATTLE, BEEF RECAP
No fed cattle sold Wednesday on the Livestock Exchange Video Auction, compared with 280 that traded four weeks previous at $109.50 per cwt.
Very limited cash trading was reported this week at $111 to $111.50 per cwt on a live basis, steady to up $0.50 from the bulk of last week’s action. Dressed trade was reported at $170 to $174, down $3 to $4 from the bulk of last week’s trade.
The USDA choice cutout Wednesday was down $1.04 per cwt at $204.25, while select was off $1.29 at $194.18. The choice/select spread widened to $10.07 from $9.82 with 125 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Tuesday, was $153.08 per cwt, down $0.54. This compares with Wednesday’s Sep settlement of $155.52, down $0.30.