ASF remains the dominant issue in global animal protein markets

The bank has just published an update on ASF developments globally.  

ASF is still the major influence on global pork markets, said Justin Sherrard, the Rabobank analyst who led the report. 

The publication was about focusing industry minds, as the world comes out of a period of lockdown restrictions, he told us.

“My feeling is, as we start to come to terms with what is happening around coronavirus, I think there is a risk that we will take our eye off what is still, for me, a more important driver than the Covid-19 pandemic for global markets over the medium term, and that is ASF.  ​

“I don’t want to play down the very real impacts and the very real challenges that lots of companies and supply chains are facing right now. There are still a lot of pending issues, and there are costs coming into the system because of changes in Covid-19 related workplace arrangements, and we are going to see permanent changes in the way that meat plants are set up and in the way that meat plants operate.​

“Still, if you are looking at what is going to really drive global animal protein markets out to the middle of this decade, I think that we will come to terms with these issues around Covid-19 within the next six to 12 months, but underpinning so much of what happens in global markets is the strength of China’s import demand. That is principally about pork, but all other proteins have seen increased import demand from China,” ​he said.

US takes pork export market share away from Spain ​

China’s pork imports are set to reach a new record level this year, said the analyst.

The big winner in 2020 in terms of pork exports to China has been the US, it took the mantle from Spain, which had been the leading the field in 2019.

“At the end of last year, in December, we started to see US origin pork imports coming up and this year they have been particularly strong.”​

There is no sign of that trend abating either. Anecdotally, Rabobank has heard that China’s pork imports from the US in May were buoyant, and weekly export data from the US suggests that Chinese demand for such US produce remains robust, he said.

“I think this trend is a product of the so-called Phase One trade agreement between the US and China. China has been moving in that direction, seeking out US product. The US has been able to export carcasses, with less labour involved in deboning and the like, as well as primal cuts to China, which has meant that the labour shortages in US plants have not been such an issue. It also means that China has been able to import the sort of raw material that it needed, particularly for its state reserve,” ​commented the analyst. ​

Partly arising out of that Phase One trade deal, with China buying more food and agri-commodities like soybeans from the US, the country has been shifting to high-protein diets for its pork and poultry production, he noted.

 “I think a more important reason for China shifting to high-protein feed formulations for pigs is that the country now has a smaller swine herd, fewer animals, so it has to look to ways to maximise production within those systems that have the best biodiversity status - what we are seeing here is quite a rational response, it is about raising the protein meal component in feed, boosting growth rates so as to lift production rates.”  ​

ASF risk level​

Given the diminished swine population, what is the ASF risk exposure in China?

“Are the risks in China the same as a couple of years ago? No, they are not, as the country has half the number of pigs today, there is not the same level of density of pigs within the country. In Vietnam, the herd has not quite diminished to the same extent but you have a reduced density of pigs there anyway. So, are the risks lower? Yes, of course they are lower, but the risk has not gone away,” ​said Sherrard.

The industry is getting better at managing the risk from African Swine Fever though: “You see that in China, where there have been quite strong imports of breeding animals – sows and boars – in the first few months of this year. That suggests that there is confidence within the integrated farming companies that are responsible for those imports that they have got the disease under control, that they are managing the disease. They understand that there is still some residual risk, but they are much more confident than they were last year in terms of their ability to manage the disease.”​

As such, he points out, it is easy to fall into the trap of believing that ASF is receding. But the virus is not going away, said Sherrard.

“We do see new outbreaks in China, but they are not being reported in the same way, whether that is down to fatigue or the Covid-19 impact. In the Philippines the disease is still quite active and spreading but mainly in backyard farms. The disease has spread to India, and we have also seen ASF recorded this year in Papua New Guinea. ASF continues to spread in ways we are not quite on top of.”​

There has also been reasonable success in containing ASF within Belgium but the same is not the case in the western part of Poland, where the virus continues to spread, he said.

“Although the disease has not got into Germany yet, it is not easy to manage these situations with live animals and commercial farms involved, the outbreak in that part of Poland is over a large area, much larger than the area involved in the outbreak in the southern part of Belgium, involving many different land use types, and with varied land ownership, so it is much harder to manage and contain there,”​ cautioned Sherrard.

It is conceivable that ASF cases could appear into any part of Europe, he said, noting that human activity, human behaviour plays a role in the virus spreading. An ASF case on a commercial farm in the northern part of Greece suggested human factors were at work in its spread, as the farm was not located anywhere near wild animal populations.

“We still don’t know what are the biggest or the most important vectors for ASF, and how they differ between different regions; it is not yet possible for us to track that and trace it with any degree of certainty, and that compounds the challenge we have in trying in trying to manage ASF. That is also one of the reasons we see ASF as the main issue driving the global animal protein markets into the middle part of this decade. We will get better at managing the fall-out of the Covid-19 virus but ASF will still be with us​,” said the analyst.