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How ASF is Changing the Chinese Pork Industry
A new report from the National Pork Board digs into the growing short- and long-term protein needs facing China and how U.S. pork can position itself to meet that demand. Pork 2040: China Market Assessment,also reveals the impact that African swine fever (ASF) is having on both China’s short- and long-term protein needs and how the Chinese pork industry and supply chain will change as a result.
Here is a summary of the Chinese pork industry today:
• The world’s largest pork consumer and import market is on the threshold of the biggest changes since Mao Zedong, who ruled the Communist Party of China from 1949 to 1976.
• China has the world’s largest domestic pork market, feeding 1.3 billion people. It has become the major influence on the price and availability of pork worldwide.
• Even though pork imports are currently only 4% of Chinese consumption, this represents around 20% of international trade and will grow further. Even small movements in a market of this size send shockwaves around the world.
• ASF is changing the structure of the pork chain both inside and outside of China. While creating enormous opportunities for pork exporters in the medium term, it’s also storing up real potential pitfalls for the longer term.
• China’s huge pork production system is still heavily based on the backyard and semi-formal breeding and processing that have driven growth for the last 20 years.
• Since 2014, this structure has been changing, as the Chinese government set out to improve food quality and to regulate the industry and limit its environmental footprint.
• At the same time, pork distribution has been slowly shifting away from the still dominant wet market retail structure to Western- style modern retail and, more recently, even to eCommerce.
• ASF, in the last 14 months, has swept across the whole country, probably leaving pork production down by more than 20 million tons by 2020.
• China’s vast backyard and semi-professional pig industry – millions of farms and nearly half of pork production even today – has no hope of meeting the new biosecurity rules needed just to contain, much less eradicate a disease which is already thought to have become endemic.
• China lacks the monitoring, reporting, and testing infrastructure and the personnel and cash to come to the aid of the pig industry.
• Thus, the backyard and semi-formal sectors are finished in China, and pig production from this sector will be insignificant probably as early as 2025.
• China, the country that has built by far the world’s largest high-speed train network from scratch in just 10 years, will also create probably the world’s largest-scale and most efficient pig supply chain, probably in just five years.
• This will happen mainly by the major pork farms modernizing and becoming much larger, involving vast investment and restocking.
• It will involve almost exclusively private sector investment, but will be heavily backed by the State in the form of subsidies and, later, by protection from imports. Foreign investors may or may not be welcome.
• Slaughtering will move nearer pig production and will largely integrate with it.
• The result, within 10 years at the latest, will be integrated Chinese pig production that should be as efficient as anything to be found in the U.S. or Europe. In principle it will be able to compete with imports on price (not least because of lower transport costs) as well as on quality.
• This means that importing pork will have become a value-added activity to be carried out only by those exporters who are as good as the Chinese at producing pork.