China Sticks to Boycott of US Meat Despite Swine Fever Losses, Kickstarts Russian Exports

Pork prices in China have been hitting the roof thanks to highly contagious African swine fever. Because there is no vaccine or treatment for this disease, the only option is to exterminate the infected pigs. More than 1-million pigs have been slaughtered so far. Between February and April, prices of pork skyrocketed almost 50% within the 2 months.

China is the world’s largest consumer of pork at 55 million tons a year, around half the global total production. Pork is such an important a staple of the Chinese diet that even Beijing fears that a surge in prices could spark public discontent. Not only it’s part of the nation’s economy, it represents Chinese cuisine and culture. Last year, China slaughtered 690 million pigs for consumption.

To make things worse, the disease has been reported in Cambodia, Mongolia, South Africa and Vietnam as well. Cambodia’s live hog price jumped 37% in the past 6 months. In Vietnam, the government has to mobilize its military and police forces to combat the outbreak. This is arguably the biggest animal disease outbreak on the planet.

As the disease spread to 31 of China’s 34 provinces, importers have to fill the gap by buying pork as far away as Europe, boosting prices and causing shortages in other markets. China’s biggest foreign pork supplier is now Spain, which accounts for 20% of imports. Germany supplies 19.5%, while Canada 16%. According to Dutch bank Rabobank, the Chinese pork output might fall by up to 35% this year.

Thanks to the US-China trade war, American pork sales to the Chinese have been disrupted. For the week ended May 9, the same week U.S. President Donald Trump announced the increase of tariff from 10% to 25% on US$200 billion against Chinese goods; China cancelled orders for 3,247 tons of American pork – the biggest cancellation in more than a year.

The U.S. farm sector had been banking on China to increase its U.S. pork purchases due to the African swine fever. However, Beijing would rather cancel the import of American pork than showing signs of weakness and willingness to load up on the meat. Beijing was reportedly willing to increase U.S. pork imports to a record 300,000 metric tons in 2019 – 81% more than the 166,000 tons in 2017.

That was in March this year. Two months later, however, Trump’s decision to escalate the trade war saw nothing but bad news for American farmers. China’s pork imports from the United States in the January-April period declined 53.6%from the previous year. During the same period, pork imports from Spain, Canada, United Kingdom and the Netherlands all rose by more than 10% year on year.

But pork isn’t the only U.S. products that the Chinese is “boycotting”. In the first four months, the imports of U.S. soybeans plunged by over 70% from a year ago to 4.31 million tons. The imports of soybeans from Brazil, however, jumped by 46.8%. Still, China is such a huge market that it’s ferocious appetite for soybeans and pork cannot be met easily by other countries.

Enter Russia, the “best friend” of China as described by Chinese President Xi Jinping when he visited Russian President Vladimir Putin in Moscow on Wednesday (May 5). “In the past 6 years, we have met nearly 30 times. Russia is the country that I have visited the most times, and President Putin is my best friend and colleague,” – Xi said at a news conference during his 3-day state visit to Russia.

Cherkizovo Group, the largest meat producer in Russia, began shipping poultry products to China last month. Now, in an interview with the South China Morning Post (SCMP), the company’s CEO – Sergey Mikhailov – reveals its plan to sell pork, soybeans and other protein products to the Chinese. He estimated that Russian poultry exports to China alone would be around 200,000 tons a year.

Last year, Russia exported 83,800 tons of pork. The Russian Ministry of Agriculture estimated that by 2024, the country’s port exports could increase to 270,000 tons. In fact, as early as January 2017, before the US-China trade war started, China has gone shopping for Russian pork, chicken and beef after the election of Donald Trump as the U.S. president.

Russia has boosted their output since 2014 when Moscow banned most Western food imports in reaction to sanctions imposed on Russia over the annexation of Crimea from Ukraine. After several years of waiting, the Russians have finally started exporting to the world’s biggest market – China – the most promising markets for Russian poultry and pork.

Last year, trade between China and Russia in agricultural products and food rose by nearly 30% to US$5.23 billion. Yet, that’s less than 5% of total trade between both nations, which reached record US$107 billion. Chinese Ministry of Commerce said the next target would be US$200 billion by 2020. China remains Russia’s largest trade partner, while Russia is China’s 10th largest trade partner.

Although Cherkizovo’s soybean production is small – about 40,000 tons a year – it is expected to grow significantly. Andrey Denisov, Russia’s ambassador to China, told Chinese media that the country should “double” its soybean exports to China. The Chinese commerce ministry also said that Moscow had agreed to increase its soybean exports.

In a joint statement released on Wednesday, Chinese President Xi Jinping and Russian President Vladimir Putin pledged to “expand the trade of good quality agricultural products and food”. The U.S. Department of Agriculture expects China’s pork imports to soar 41% this year. But it’s too bad China has chosen to tell the U.S. to fly kite even when they are desperate for such products.

Source: Finance Twitter