H1 2020 Review: China’s rapidly shifting pork import market under COVID-19
by Angela Zhang, The Pig Site
9 September 2020
Angela Zhang, Head of Business Intelligence Division at IQC Insights, deeply reviewed and forecast China’s rapidly changing pork import market 2020 based on its domestic supply and demand situation as well as the performance of global pork exporters, major plants and widely differentiated pork products.
Following the upward trend in 2019, China’s pork import market went higher in the first half year of 2020. Despite the spreading COVID-19 pandemic and subsequent weak pork demand especially in the foodservice sector, China imported 2,074,128 tons of pigmeat and 656,344 tons of pork offal in total from this January to June, increasing by 153.3% and 33.2% respectively on a y-o-y basis.
It seems that the reduced pork consumption demand did not cast a shadow over China’s pork import market at all. The pigmeat import volume in the first six months of this year has exceeded that of the full year in 2019. This could be attributed to the plunging pork production in the first half of 2020 due to the impacts of ASF, and the relatively lower pork prices in overseas markets during the same period.
China’s pork import market H1 2020: running on a high position
As shown in the following chart, China’s pork import volume remained stubbornly high throughout the first six months of this year. Especially for this March and April, the y-o-y growth rate reached 201.9% and 185.6% to 384,015 tons and 389,891 tons respectively.
Internally, the major growth driver is the domestic large supply gap for pork. Due to the negative impacts of ASF, China’s annual pork production declined by 21.3% to 42.55 million tons in 2019. When it comes to 1H 2020, the recovery in pork production is still slow. The domestic pork production continued with the downward trend in the first six months of this year, decreasing by 19.1% y-o-y to 19.98 million tons. Consequently, the expectation for the supply-demand imbalance in the future market stimulates China’s pork importers to purchase and stock more pork from overseas markets than previous years.
Externally, the rapid increase of USA’s pork export to China from this January to June is another significant driving force for the explosion of China’s pork import volume. China totally imported from USA 407,896 tons of pigmeat and 130,061 tons of pork offal during this period, growing by 503.3% and 85.6% respectively on a y-o-y basis.
In terms of the product portfolio, the blowout of the pork import market since last October was primarily driven by the pigmeat subsection (e.g. shoulders, legs, bellies and collars), secondarily by offal products. The major reason is, China has been the major destination for offal products before the ASF outbreak, while more pigmeat products were transferred from European and Southeast Asian markets (e.g. Japan and South Korea) to China, driven by China’s large supply gap and expected soaring pork prices.
The performance of global pork exporters to China: a fiercer zero-sum game
The competition among global pork exporters to China is a zero-sum game in nature, and it got fiercer in the first half of 2020. The biggest winner was USA, although its pork industry was struggling with both internal COVID-19 and external trade war. Besides retaining its championship in pork offal, USA also retook its market share in the pigmeat section from other exporters and returned to the long-lost Number one. Such significant increases were mainly achieved under the following factors:
· More American pork producers are pushed to remove ractopamine to meet stricter Chinese regulations since last October. Namely, more plants have been qualified for pork export to China from then on.
· Due to the outbreak of COVID-19 in USA, dozens of meat processing plants were closed when more than 3,000 workers sickened, leading to at least 25% decrease in USA’s pork and beef processing capacity. As a result, farmers have to euthanize millions of pigs to avoid overstock since this April, or more economically, accelerate their pork export to China in a more competitive price than other countries.
· USA’s phase one trade deal with China helps and motivates its farmers to nab and reinforce their market share, both in China’s pigmeat (19.7%) and pork offal (19.8%) in the first half of this year, despite the currently ongoing political tensions between these two nations.
Opposite to USA, Canada lost nearly half of its market share to other exporters both for pigmeat and offal products from this January to June. As shown in the above chart, Canadian pork exporters suffered a vertiginous drop within the four months of September to December 2019. The major reason is Canadian pork plants were suspended to export to China because of counterfeit veterinary health certificates attached to pork products since June 25, 2019. Although the ban was lifted from November 5 2019 on, it continues to make a far-reaching impact on the first half of 2020. Among all pork exporters, Canada achieved the lowest y-o-y growth rate in pigmeat (35.8%) and highest decrease rate in pork offal (-24.2%) from this January to June. Meanwhile, its ranking in pigmeat and offal products also fell from the 3rd to 6th.
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