African Swine Fever: A Global Update – December 2019
ASF remains the dominant issue in global animal protein as we head into 2020, with China as the focal point of the global ASF challenge, according the Rabobank’s most recent global update on the topic.
Ongoing spread of ASF across Asia, a possible second wave of outbreaks in Northern China, and continuing occurrences in Europe confirm the disease remains the dominant issue in global animal protein. “The ongoing spreading of the disease, and the price response to the impacts of ASF are rightly under the spotlight,” according to Justin Sherrard, Global Strategist – Animal Protein. “The market is improving its understanding of the issue and its near- and longer-term implications, but uncertainty is just as much a part of the picture.”
China: Record level-prices highlight the challenge of living with tight supply
Live hog and pork prices saw a correction from their upward trajectory in November, but we expect these prices to move up again as we approach the Chinese New Year. We expect more government intervention to manage price levels over the coming weeks and months. Piglet prices did not correct, highlighting the strong interest in restocking at high price levels. Meanwhile, restocking is underway, with some successes and some setbacks.
ASF continues to spread in Asia and Europe – less obvious than in China, but just as challenging
In Asia, the disease continues to spread in several countries, with other countries still at risk. As we contemplate the impact on production in 2020, it is clear that many countries will be competing for the scarce tradable pork supply.
In Europe, the disease keeps moving, aided by negligent human activities, threatening production and potentially disrupting global trade.
Trade is increasing across the species, with high prices testing demand elasticity
China’s imports of pork have continued at strong levels, testing global supply availability and driving up prices. Imports of other species have also risen, and the availability of tradable supplies and prices are affected across the board. Other countries affected by ASF have yet to lift their imports, which will further tighten global supply. A breakthrough in the US-China trade war would help increase availability to China, without affecting the global balance.
Managing ASF is set to become the global animal protein challenge of the 2020s
High pork prices in China and major exporting regions are creating significant challenges for customers and consumers. The whole sector loses if high prices cause a consumption drop that becomes permanent.
Some market participants are struggling to find a sustainable balance between the near-term margin opportunities of higher exports and support for longer-term customer partnerships. We expect instability in markets until this balance is found.
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