Covid-19 confounds pork stock issues sparked by ASF

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The outbreak of the Covid-19 coronavirus has confounded supply issues caused by African swine fever (ASF), leading to a further decline in global pork stocks.

According to a new report from Rabobank, pork production in China declined by over 20% in 2019 as ASF impacted supplies. Although Covid-19 has provided further volatility, the bank said that ASF is still the biggest influence on global supply levels.

Amid a “four-pronged attack” on the market, Rabobank’s analysts forecast a further 15-20% decline in pork production in the country this year. Pork imports to China increased by 67% to make up for the shortfall in 2019, with Spain, Germany and the US the biggest exporters.

The report, ‘African Swine Fever: A Global Update’, states that four issues will determine output levels for the sector in 2020.

First, coronavirus, which will delay restocking of hogs lost to last year’s ASF outbreak. The bank forecasts this will now likely take until the second half of 2020 to pick up as labour levels and the movement of livestock return to normal.

China’s food services businesses and retailers are also being hit as firms close their doors as a result of coronavirus, suppressing demand and leaving consumption levels difficult to forecast.

The second comes in the form of the threat posed to pork supplies by the trade dispute between the US and China, despite its current truce. While this has so far led to an increase in US pork exports, its long-term evolution is much more unclear and is creating uncertainty in the wider market.

Third is the Chinese authorities’ management of domestic pork prices, which is  further complicating the trade outlook. If prices are kept at their current level, we could see production growth stall and trade soften, while consumers benefit from more affordable pork. If authorities allow prices to rise, we will likely see more aggressive re-stocking from pork suppliers, but at a less affordable price.

Finally, the ongoing threat of ASF spreading beyond Poland’s eastern borders and into Germany, Europe’s largest producer, is muddying the outlook throughout Europe.

“We predicted last year that ASF would have an unprecedented impact on global meat supplies. Only now as the data filters through is the scale of the devastation clear,” said Justin Sherrard, global strategist for animal protein at Rabobank.

“While the outlook for 2020 is slightly more upbeat, coronavirus is another match thrown into an already combustible mix. It makes for a four-pronged threat that will be keeping producers, traders and retailers awake at night. Stopping its spread remains the absolute priority.

“Many of the issues that initially impact Chinese producers will have wider-reaching effects on global supplies. Those in Europe, Southeast Asia and America will be monitoring further developments closely.”