Decimation of China’s hog herd has a silver lining for Canada

African swine fever outbreak fuelling price surge but if the disease comes here, it would be a nightmare

African swine fever outbreak fuelling price surge but if the disease comes here, it would be a nightmare

African swine fever could be a boon for the pork sector — if North American producers can keep the devastating disease at bay.

“You always hate to make money at the expense of disease in other countries, but nonetheless, the opportunity is there,” said Brent Bushell, general manager of the Western Hog Exchange.

The virulent disease, which is harmless to humans but deadly for pigs, has been around since the 1950s, but erupted last summer in China, the world’s largest producer of hogs. It has swept across the country, cutting its 440-million-head hog herd by nearly a third. The disease has caused major losses in Mongolia and Vietnam, shown up in Belgium, Hungary, and Russia.

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“There’s a production hole that needs to be filled by other countries around the world,” said Bushell. “Realistically, once you get to 20 per cent loss in China, there’s not enough pork in the world that’s going to fill that gap.”

That could be good news for North American hog producers, he added. Last year, the average Canadian hog producer lost about $15 a head. But the sudden supply drop has driven up prices and hog futures in both Canada and the U.S.

Increased Chinese demand is partially responsible — pork accounts for 70 per cent of the meat protein there and so far, Chinese consumers haven’t scaled back their consumption.

“It’s a huge opportunity for countries like Canada,” said Bushell. “We have producers who can lock in profitable prices between now and the end of December, and that’s something we haven’t seen in the last 20 years.

“If you’re in the industry right now, you’re making money.”

Chinese trade tensions

But U.S.-China trade tensions could pump the brakes on those prices.

“The U.S. is positioned as a very large producer that could provide some pork to China, and that means Canada could as well,” said Bushell. “But politics in the U.S. play a very large role.”

Earlier this month, President Donald Trump upped tariffs on Chinese goods to 25 per cent (from 10 per cent), causing the futures market to plummet. And that could drive down Canadian prices as well.

“There’s no such thing as a made-in-Canada price for pork — all of our pricing formulas are based off U.S. pricing,” said Bushell. “In a perfect world, this trade dispute should have no bearing on us in Canada at all. But because we price off the U.S., whatever happens in the U.S. happens to us — good, bad, or indifferent.”

Canada has also faced escalating trade tensions with China following the arrest of Huawei executive Meng Wanzhou on a U.S. extradition warrant. In addition to a canola ban, Beijing suspended shipments from Olymel’s Red Deer pork plant and another in Quebec, ostensibly due to labelling issues.

“We have to decide whether it’s truly a labelling issue, but in speaking to the Canadian Pork Council, it believes it is,” said Bushell. “It’s not that Olymel is all of a sudden not selling pork to China. It’s just that Red Deer’s Olymel isn’t selling pork to China.

“If it is a labelling issue — which I believe to be the case — it’s something that can be resolved very quickly.”

Swine fever free

Even so, Canada will only be able to take advantage of these higher prices if it manages to keep African swine fever out of the country.

The reason is twofold. First, African swine fever can decimate a hog herd, killing to 90 per cent of the animals. And even a limited outbreak could cost Canada a good chunk of its export market, which soaks up 70 per cent of total production.

“Because you have countries around the world that don’t want pork that comes from any area that has African swine fever, you may start to eliminate your export markets,” said Bushell.

“If we happen to get it in Canada and because of that, the world says it doesn’t want anything to do with our pork, that would pretty much devastate our export market.

“And with only 30 per cent domestic use, we’d have a lot of challenges trying to eat our way out of it.”

So keeping North America swine fever free has become the primary goal of the North American pork industry.

“It’s something we’re spending a lot of time on right now,” said Darcy Fitzgerald, executive director at Alberta Pork. “We want to make sure we don’t have the problem come up to begin with.”

In addition to ramping up biosecurity at international airports (the disease can be transported in pork products), the industry is working with its international counterparts to ensure the flow of trade remains open even if Canada should contract the disease.

One way to do that is creating buffer zones, which have been used successfully in other countries and regions where African swine fever is present. In Canada, that could mean hog exports from Alberta aren’t impacted if, for instance, the disease were found only in Ontario.

“We have agreements with the United States and European Union for that, and now we’re looking to our other trade partners to recognize our ability to zone or compartmentalize certain areas so that we can keep trading,” said Fitzgerald.

“Hopefully they’ll allow the flow of pork products if they came out of zoned areas, and that will lessen the impact.”

Better biosecurity

The alternative could be the final nail in the coffin for a struggling Canadian pork sector.

“We have other countries that are willing to pay a premium for Canadian pork because they know it’s some of the best raised and safest in the world,” said Bushell. “That’s really what’s at risk here — the safest, best-quality pork in the world. At the end of the day, I think losing that (reputation) would be devastating.”

On the farm level, pork producers will need to continue practising stringent biosecurity — something they should be doing already with the recent outbreaks of porcine epidemic diarrhea virus (PEDv.)

All high-traffic hog sites should be treated as if they were contaminated with a virus, particularly transport trailers, barn entrances, and barns themselves. That means boot changes need to be enforced for every person every single time they enter or leave the barn, and trailers need to be washed, dried, and disinfected before and after transporting animals.

“Biosecurity is biosecurity, and it doesn’t change from disease to disease. It’s just about making sure we’re diligent every day,” said Fitzgerald.

“It really comes down to how we can change practices and make sure we have all the protocols in place. That’s our next challenge.”

But producers shouldn’t wait until the disease hits Canada before changing their practices, Bushell added. While today’s high prices should give Canadian pork some “breathing room” after more than a decade of weak prices, the disease could cripple Canada’s already beleaguered pork industry if it comes to Canada.

“If I look at the profitability of western Canadian producers over the last 10 years, the average producer with a finishing barn has been losing a lot of money per head,” he said.

“If it does devastate Canadian hog herds, I think a lot of producers will say, ‘Here’s my choice — I can either fight to stay in an industry that doesn’t pay me enough money to be profitable, or I can just get out and do something different.’

“That may become the tipping point for producers to say they’re just not going to do it anymore.”

About the author

Reporter

Jennifer Blair is a Red Deer-based reporter with a post-secondary education in professional writing and nearly 10 years of experience in corporate communications, policy development, and journalism. She's spent half of her career telling stories about an industry she loves for an audience she admires--the farmers who work every day to build a better agriculture industry in Alberta.

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