Glacier FarmMedia – China’s rejection of all Canadian meat is a stunning act considering forecasts that pork prices there will rise 70 per cent or more in the coming months, topping records hit in 2016, as its hog herd staggers under the onslaught of African swine fever.
Pork is by far the most important meat in China and accounts for a hefty portion of its consumer price index so soaring prices could lead to consumer anger and unrest, compounding the worries from a slowing economy as the trade war with the United States slows exports and production.
To cut off a major pork supplier like Canada, when American pork is already restricted by a 62 per cent tariff, is like cutting off your nose to spite your face. Canada supplied 12 per cent by dollar value of China’s pork imports in 2018. This year we were supplying even more.
In the first four months of this year, Canada exported $310 million worth of pork to China, up 80 per cent over the same period last year. Beef exports to China and Hong Kong totalled $115.4 million, up 70 per cent.
China’s communist leaders are unburdened by democratic norms like free elections and opinion polls but will they be able to ignore for long an unhappy population, angered by mismanagement of a crisis?
The latest problem is that China says it found fraudulent documents accompanying meat from Canada’s ractopamine-free certification program.
China’s meat blockage must be viewed in the context of its multiple pressures on Canada, including the detention of two Canadians in China and the blocking of canola imports, to get Ottawa to free Meng Wanzhou, a top executive of China’s tech giant Huawei, now detained in Vancouver awaiting an extradition hearing on an American arrest warrant.
Canada’s farmers are feeling the pain of reduced exports but China’s people too will soon pay the price for Beijing’s hard line.
The country’s own agricultural ministry estimates that pork prices will jump more than 70 per cent from the previous year because of shortages caused by the culling of the herd to try to limit the spread of ASF. The cull and other measures are having only modest success.
Inflation in China is rising, in part because pork prices are already almost 30 per cent higher than last year at the same time and the real pork shortage won’t hit until the second half of the year.
China’s pork imports in May were near a three-year high and were up 63 per cent from the same month last year.
In that month, it was already cutting off some Canadian exporters and had the tariff on American pork, so hog producers in the European Union and Brazil reaped the benefit. China is also pulling in meat from other South American countries, Russia and India. Imports of lamb, beef and chicken are also much increased.
Also, China’s agriculture ministry recently bravely said ASF is now “effectively controlled” and production of other meats such as poultry are in good supply.
However, many observers believe there will be no quick solution.
An analyst with Economist Intelligence Unit believes pork prices in China will rise by 80 to 100 per cent in the third quarter compared to the same point last year, significantly higher than the official forecast of 70 per cent.
If China’s disputes with Canada and the U.S continue, the North American players should be able to backfill world demand that is being unfilled as other exporters concentrate on China, but likely at less profitable rates.
I should also note a Bloomberg news story that explained how China’s ban on Canadian canola and canola meal is hitting its massive fish farming sector. Much of the meal from canola in China goes to fish farmers. Canola meal prices have leapt higher since the full ban came into effect, raising the cost of producing farmed fish and likely the price paid by consumers.
Ultimately, the Canada-China situation is really an outgrowth of the key conflict between China and the U.S. over China’s place in the world, including who will succeed in the fast-developing digital economy of 5G networks and other new generation technology.
Currently, China’s leaders are willing to suffer short-term pain for what they hope will be long-term gain, but at what point will Beijing determine that the pain has become unbearable and it is time to make a deal?
This article was originally published at the Western Producer.