Global meat shippers have three years to make the most of the outbreak of fatal pig disease in China before Chinese pork imports peak, according to a report released by the U.S. pork industry, which is competing for sales against Europe and South America.
The forecast issued on Wednesday starts a clock ticking for companies to profit from the epidemic of African swine fever (ASF), which has killed up to half of China's hog herd since August 2018 and pushed Chinese pork prices to record highs.
China's pork imports will top out in 2022, before declining as domestic production recovers from the disease, according to the report that food consultancy Gira prepared for the U.S. pork industry. Import volumes will stay high through 2025, but prices will ease, Gira said.
This will be a very different period to the 2019-21 distressed market opportunity, the report said.
U.S.-based processors like Seaboard Corp and Smithfield Foods, a unit of WH Group Ltd , face a disadvantage for sales, compared with other suppliers, because Beijing imposed steep tariffs on U.S. pork as part of the countries' trade war.
Still, Smithfield retooled a U.S. slaughterhouse to supply pig carcasses to China, the world's biggest pork consumer, according to employees.
Chinese processors need pork in the short term to keep slaughterhouses running, said Jack Shao, international sales and marketing manager for Hormel Foods Corp .
There is a huge void right now, Shao told reporters on a conference call.
China will likely recover from African swine fever by 2027, but production will be 13% below where it was before the country's first case was confirmed in 2018, according to Gira. High pork prices as a result of the outbreak will change Chinese diets over the long term, with some consumers switching to cheaper chicken, the consultancy said.
By 2040, China's pork imports are expected to fall back to 2017-2018 levels, according to the report.
As we come out the other side, the market left for pork will be lower, said Rupert Claxton, Gira's meat director. We're looking at the market post ASF as being 80% of what it was in 2018.
Rabobank predicted in a separate report that U.S. pork exports will climb 14% next year, but China's production will start to rebound in 2021.