Just in the past week there has been a flurry of fresh fundamental news pushed into the agriculture world–mostly via sources which you need to pay a hefty subscription fee to–related to ASF; but not just in China. As the DM video shows below, there is an outbreak continuing to be felt in major parts of Germany; and another Asian news source is suggesting that Malaysia and some other Asian countries may be using fake, unlicensed ASF vaccines. And China wants to put a stop to this, especially since there are reportedly new strains to haver to contend with since the original outbreak in 2018 (in China). The SCMP reported China banning pig imports from Malaysia last week as a result.
But I had to ask myself a major question, given the fact that some of the countries other than China who have ASF are major suppliers to both hogs and pork to China: does this create a better marketing/exporting opportunity for the U.S., as it would make sense to me that these lost supplies are going to need to be made-up so that food inflation in China doesn’t become a major policy issue in the 2nd half of 2021? I think this is indeed going to be the case; I think that the Chinese will likely continue to work hard on buying US pork and hog genetics in “waves” so as to try not to disrupt prices too much. And these “waves” of buying are likely to continue through June in my view. Continued below…
The USDA Ag attaché in suggested in a report early last week that China’s overall imports are likely to drop around 15% year-over-year, as their hog herd increases about 14%–but this is not going to be enough to keep prices from remaining historically high. As such, imports are likely to remain high; if the USDA attaché is correct, a 15% reduction off of the 4.3 MMT figure of 2020 would equate to 3.655 MMT; this would still be almost 90% higher than 2019. And my expectation at this time is that the U.S. will garner a larger share than it did in 2020, as Germany’s herd is being affected by ASF currently. Relying heavily upon this analysis is my expectation that the Chinese Yuan will begin to appreciate against the US Dollar the 2nd half of 2020 calendar year.
Lastly, an issue I’ve continued to struggle with since the end of 2020 has been whether the Chinese consumer is being negatively impacted in his/her taste-preference due to ASF headlines and/or higher prices. My conclusion at this time–after talking to a person in Beijing at the recent USDA Agr. Outlook Forum–is that, No, the pork consumption is likely to remain elevated compared with beef and poultry. In fact, below, you can see some of the text from the attaché report as it relates to his view on Chinese pork consumption; he foresees it also moving higher–and in fact back to pre-ASF levels, even with strong competition from the lower priced substitutes.
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