China’s booming demand for pork creates opportunities for Canadian producers. In 2016, Canadian pork exports to China made up 15% of its total pork export valued at a record CA$590 million, up 160% from a year earlier. So it’s not a surprise to find that the in a Canadian shipment raised concerns about the stability of this export market.
Beyond those possible short-term trade disruptions, will the strength in China’s demand for pork offer lasting opportunities to Canadian producers and processors?
Chinese hog herd liquidation behind the surge in imports
Hog production has declined rapidly in China over the last three years. The Chinese sow herd declined 20% between 2013 and 2016, mostly due to high corn and soybean meal prices. The decline in pig production wasn’t as steep, as gains in productivity made up some of the shortfall.
Chinese farm consolidation led to the expansion of the country’s trade. In 2013, China imported 12% of all traded pork in world markets. This jumped to 27% in 2016 and China’s forecast to import 28% of 2017’s global pork imports. By producing and consuming nearly half of the world’s pork, even a small change in Chinese domestic demand significantly impacts the Canadian hog market.
China dominates the global pork trade, yet its total pork imports only account for a small portion of Chinese consumption. That’s growing, but slowly: Chinese pork imports represented 1.4% of its domestic needs in 2013, increasing to 4.0% in 2016.
Rising demand amplifies the supply shortfall in China
China’s demand for pork has risen significantly with the last decade’s rapid growth of China’s middle class. The USDA estimates China consumed 55 million tons of pork in 2016, the lowest figure in 3 years, with the decline in consumption a result of the shortage of pork in the domestic market. The OECD-FAO projects Chinese pork consumption to total 63 million tons by 2025.
The competitiveness of the Chinese hog industry has long been constrained compared to that of developed countries, due to their relatively high production costs and shrinking arable land resources. Ongoing environmental policy reforms have forced millions of backyard farmers out of business in recent years. With Chinese hog prices often below the costs of production, the recent price decline resulted from a small production surge in 2016 and a stagnating seasonal demand after the Chinese Spring Festival (a major national holiday).
Outlook for the next 12 months is positive
Medium and large-sized farms have been expanding their production in response to better hog prices lately. China’s growing production capacity may result in lower pork imports in 2018. Yet production growth should not entirely erase market opportunities in China. China’s domestic consumption for pork is expected to continue trending up, leaving room for Canadian exporters to fill the gap between demand and supply.