Producer awareness Recent global happenings impact U.S. producers

Published on Feb. 8, 2020

During a CattleFax Trends+ Cow/Calf webinar, published Jan. 29, CattleFax Analyst Patrick Linnell explains several long-term trends and important watch list items for producers to be aware of in 2020 due to recent global happenings including African swine fever (ASF), the Phase-One Trade Deal with China and Australia’s ongoing drought and recent wildfires.

African swine fever

            “Number one on the list is African swine fever, the disease that has ravaged swine populations throughout China and southeast Asia,” states Linnell. “The fact of the matter is, ASF is simply not going away.” 

            Linnell notes when looking at a map of ASF cases across the globe, one can see how vastly the disease has spread through southeast Asia, China and into Europe. 

            “The difference is this has had a huge impact and is more heavily weighted on the domestic hog populations throughout Asia, whereas in Europe, the disease is concentrated more in wild hogs and they have been able to prevent it from affecting their domestic hog population through their biosecurity practices,” he explains.

            Because ASF has devastated the Chinese domestic hog population, Linnell notes it has done significant damage to the country’s pork production.

            In fact, according to Linnell, China saw a 50 percent decrease in its pork production in 2019. 

            “As we roll into 2020, we expect to see another decline in pork production in China as the disease continues to remain unresolved, and it is hard to imagine a situation at this point where the Chinese hog population can significantly improve and make a comeback,” he says. “To put it into perspective, if all of the current global protein production exports across the entire world were diverted to China, it still wouldn’t make up for the loss they have seen in their pork production.” 

            Linnell notes, due to the dire situation, U.S. pork exports to China have undergone a dramatic increase since the summer of 2019. 

            “The most recent data we have from November shows U.S. pork exports to China is up a whopping 652.3 percent versus a year ago,” he states. 

            Linnell also notes when looking at hog prices around the globe, there is an obvious impact due to the pork shortage. 

            “The most recent data, from November, shows live hog prices in China are up 163 percent compared to a year ago,” he says. “Some other major hog producers such as the U.S., Germany and Brazil have also seen some increased prices.” 

            Linnell continues, “I would also like to note there are currently no cases of ASF in the Americas, but this doesn’t mean it can’t happen. Therefore, ASF is something we are going to have to continue monitoring.” 

Phase-One Trade Deal

            “When looking specifically at agriculture in the Phase-One deal, the increases China has committed to would push U.S. ag exports to China to unseen levels,” Linnell states. “As we look through the key points in the agreement, it is pretty favorable as the wording would suggest.” 

            He continues, “First of all, hormones are allowed. It is a significant achievement that they have moved away from their zero-tolerance hormone policy and are accepting our production practices. They have also eliminated the over 30-month restriction and have recognized U.S. traceability and FSIS food safety standards. The last thing they promised was that they will study ractopamine, they haven’t said they will allow it but they have committed to studying it at this point.” 

            Linnell also notes it is important to keep in mind the tariffs on Chinese trade remain intact at this time. These include a 47 percent tariff on beef and a 68 percent tariff on pork.

            He also explains although the deal was signed in on Jan. 15, the effective date is March 15. 

            Although the trade deal was a huge step forward, Linnell points out there is still work to be done at gaining share in the Chinese market. 

            “We have an uphill battle ahead of us in terms of gaining market share and developing supply chains to China,” he says. “In fact, when looking specifically at Chinese beef imports in 2019, the U.S. was a minor player. The three major players are South America – specifically Brazil, Argentina and Uruguay as well as Australia and New Zealand.” 

Australian drought and wildfire

            Linnell explains with all of the drought and wildfire Australia is experiencing, their cattle slaughter inventory is still running fairly high. 

            “As we move into 2020, this suggests they will continue to drain down their cattle inventory,” he says. “On the beef production side, while slaughter is increasing, the herd is decreasing and there is only so much beef that can be produced.” 

            Therefore, Linnell predicts a decline in beef production in Australia this coming year. 

            He then mentions some statistics regarding the wildfires. 

            “The Australian fires are certainly a terrible situation for those that are impacted, but at this point our friends at Meat and Livestock Australia say a fairly small portion of cattle actually live in fire affected regions, with about nine percent of the herd living in significantly impacted regions and another 11 percent in partially impacted regions,” Linnell notes. 

            “Direct stock losses from the fire are less than one percent loss,” he adds. “They predict feed availability and on-farm infrastructure will be larger issues.” 

            Hannah Bugas is the assistant editor for the Wyoming Livestock Roundup. Send comments on this article to roundup@wylr.net.