“African swine fever (ASF) is a global reality that will cause changes: it is a disruption of global trade,” said Ricardo Santin, vice president and market director of the Brazilian Association of Animal Protein (ABPA), in São Paulo.
This disease represents a rupture of all those relationships and negotiations that were made in the world meat trade, but that still are not totally felt. “There will be a breakdown of the normal trade flow and, although we do not like to celebrate the misfortune of others, Brazil will of course have to produce more meat,” he added.
It is much more important for Brazil’s swine production, so it is necessary to authorize new companies and plants, although those that are already authorized are exporting and are being asked for more.
A hole in animal protein
Santin used the data from Rabobank experts at the International Poultry Council (IPC) meeting a few weeks ago. China needs to replenish 30 to 35 percent of its animal protein production, which means some 16.5 million metric tons (MT) of meat. If China manages to increase local production of substitute proteins by 4 million MT and ─ according to Rabobank estimates — it manages to import 1.5 to 2 million tons more of pork and another 1.5 to 2 million tons of poultry meat, makes a total of 8 million MT, which is not quite half of what it needs.
Where are they going to get the other 8 million MT? “As you can see, the size of this hole is huge and nobody knows when it will end,” observed the ABPA vice-president. “And we only talk about projections. Up to now, we cannot see the impact, while China tries to control the virus.”
More chicken as a consequence
In fact, it is swine production of other countries that will benefit the most from this problem. Many will want to buy pork from Brazil or from other countries, such as the United States or Europe.
Pork is the most liked meat for the Chinese consumer, followed now by chicken, which as a consequence is going to be benefited, because if there is no pork, they will have to eat other meat. Beef is much more expensive.
Santin said the price of poultry will start to rise. “The effect of the price of chicken and pork is given by the expectation that China has high demand and little supply,” he added.
More chicken for China?
Maybe the Chinese change their taste for chicken. Santin sums it up like this: China has already requested quotations for chicken breast meat. It should be emphasized that before, they only bought feet and wings. “Only after a while they did start buying thighs, when production fell as a result of bird flu.”
The Chinese never bought chicken breast before. Now, they buy it from Russia, and at an interesting price. In addition to that, price of feet and wings already rose.
The perfect storm, even for Mexico
So, today the picture is different. “We had that perfect storm against Brazil because of [Operation] Weak Flesh. Now we have the perfect storm in favor of Brazil and other exporters,” said Santin.
The leader of the ABPA emphasized that the benefits would not only be for Brazil, but also for the United States or Mexico, and indisputably for Europe, which is the main pork exporter in the world. "It is a disruption of global trade," he insisted. We will see the case of Mexico, which is a large meat importer, but also an exporter.
The market is not only China, but also Vietnam, Cambodia or Laos. There are 13 countries with ASF outbreaks. "Only Vietnam will import around 1.5 million MT.”
Brazil could make the great effort of increasing carcass weights and achieve exports of 300,000 MT more to China, on top of the 600,000 that it already exports. If Europe also makes the effort and, instead of exporting 1.9 million MT, will export 3 million MT, there are still many tons to supply the demand. “It's a very complicated situation for the Chinese and for the global market,” but there are going to be possibilities.
Years for recovery
On the other hand, there is also China's own swine production, which will take years to return to where it was. As mentioned by Santin, a disease like ASF does not choose between finishing pigs or breeders. When it reaches a region, it attacks everything. This means that China's pig inventory will have to be rebuilt.
In addition, facilities have to be cleaned, get new breeders and raise them until they start to have piglets. Then, the process will start over again. In the best-case scenario, “it is a crisis of two and a half or three years, at least,” although “there are those who think that it will take 5 to 10 years for China to return to produce 55 million MT”.
The other problem is backyard production, which in China seems to be 20 percent of total production. “If the virus reaches half of these backyard animals, there will be another 5 million MT that will not be produced, because they will have to stop that type of production to eliminate the virus.”
Second half of 2019: the key
A disruption is seen all over the front. “In Brazil, we see an opportunity, which is already happening in terms of pork and poultry, but which will intensify as of the second half of the year,” Santin said.
When such sanitary episodes occur, many animals are eliminated so that they do not become infected, even if they have not reached the market weight. The spread of ASF is very large because it is easily transmitted, even through ticks. This is aggravated if there is no biosecurity.
“We're going to reach a point where that meat coming in earlier is going to start lacking,” which will happen in the second half of 2019. The situation will become very difficult, in terms of the need for protein substitution in China, both for poultry, as well as pork, beef, and even eggs.
View our continuing coverage of the African swine fever outbreak.
