There’s another virus that has been upending the world order in ways that no one ever could have predicted, although it’s mostly flying under the radar.
“Right now, 75 per cent of the world’s hogs are threatened, and a third of the global swine herd just vanished last year,” Brett Stuart of Global AgriTrends said during a session at the virtual Canadian Beef Industry Conference. “That’s just shocking.
“If I went out to the cattle people and said a third of the global cattle herd is going to be dead this year, there would be no end to the talk of cattle futures.”
Stuart estimates African swine fever (ASF) reduced China’s hog herd, the world’s largest, by more than half. That’s created an annual shortfall of 24 million tonnes of animal protein and sent China on a global buying spree. It’s gone from buying one per cent of American production to 10 per cent in just a year, Stuart said. And the country also upped its purchases of other meat.
“A year into ASF losses, China became the largest beef importer on the planet,” he said, adding it has also bought a lot of chicken.
Still, it’s not enough.
“The problem with a loss this massive is that there is no global protein source that can fill this gap. You can shoot every bullet you have and you’re still 17 million tonnes short in China,” he said. “The harsh reality is there is nothing out there to fill that gap. There’s nothing out there that can.
“The Chinese are eating less protein. There’s no way around it. They’re not going into starvation, but they’re eating less pork than they used to. When you think about what that means to global markets, it’s significant.”
Still, while pork prices are high in China, the situation is far different in North America.
“A third of the global swine herd has gone and hog futures are floundering, and farmers are going out of business in the United States and Canada,” said Stuart. “It’s a dire situation.”
Hog prices in Western Canada are based on American ones, and the story south of the border is one of overexpansion of the pig herd, he said. (COVID-19 has also had an impact as outbreaks have hit pork processors in the U.S., boosting already high pig inventories.)
But politics are also at play, said Stuart.
“The Chinese government has not opened trade up,” he said. “It has retaliation tariffs and pressure on who can import and who cannot. We have a trade war going on, and the U.S. is coming into an election. And while China is buying a lot of U.S. pork, it’s not buying enough to lift our markets. So we have a massive price disparity in pork.”
A global fight
But Stuart also highlighted the battle to contain the virus that causes African swine fever (which is lethal for hogs but doesn’t affect humans). It persists in the environment and can even survive in frozen meat for more than a year, he noted.
“This virus is very hard to kill,” he said. “Just like COVID-19, you can hate it, you can be frustrated, but barring a vaccine, there’s nothing anybody can do about it.”
There is, however, a massive effort to keep the virus from reaching Western Europe.
When ASF was found in wild boars in Belgium, domestic pigs in the local area were culled, fences were erected along forested areas to contain the wild boars, and a massive hunting operation was undertaken.
“It took some unbelievable efforts of trapping boars in the forest. They got it under control,” said Stuart before adding that infected boars in Poland are now the big worry.
“ASF keeps marching west across Poland. It’s right across the river from Germany. Germany is a major global pork exporter. They’re building fences, they’re doing everything they can to try and keep ASF from jumping into Germany.”
If that effort fails, the consequences are massive.
“One case will shut down your exports. That’s why this is such a big deal,” he said.
And even though China is claiming it’s winning the battle with African swine fever, the situation will not be resolved quickly, he added.
While large commercial sow farms have enjoyed success in their eradication efforts, those large farms only represent about 12 per cent of China’s production, he said. The remainder have under 1,000 head and so can’t have their own trucks, feed mills and other infrastructure, which makes control efforts more challenging.
“The reality is that China is not going to get over this any time soon,” said Stuart. “The gap will not be filled, the prices will stay very high, and those high prices have an impact on imports. Those rising prices have an enormous impact on global prices.”
China is buying very aggressively from the Southern Hemisphere, Western Europe and North America, which will pull hard on global protein supplies and cause inflation on a global basis.
“That’s where we are headed now. This ASF in China is driving global protein inflation.”
What happens next is unknowable given the factors at play.
“The story is not over yet. Let’s see where we go with Chinese demand.”
But what is known is that this virus has had a massive impact around the planet.
“It is an absolute global protein game changer,” said Stuart.