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Pork shortage in China may give American farmers a chance to make money



Pigs reared by farmers are observed in Lincoln County on December 5, 2018 in Fuyang City, Anhui Province, China.

Visual Chinese Group Getty Images

PEGIN – China needs more pork imports than ever as the country fights outbreaks of swine disease – and this could become a business opportunity for US farmers if the two sides reach an agreement for trading.

The African swine fever struck Chinese pig farms last year, causing severe shortages of meat, which is the mainstay of hundreds of millions of Chinese households.

Prices have almost doubled, and publicly available data indicate that Chinese pork production is likely to fall by several million tonnes this year.

In December, a kilo of pork cost about $ 22.50, or $ 1

.46 a pound, according to Beijing-based BRIC-Agri Info. Last week, a pound of pork jumped to 42.46 yuan, or $ 2.75 a pound, according to figures released by the Commerce Department.

At the same time, one of the demands of the US in ongoing trade negotiations is that China buys billions of dollars worth of American farm products. At the end of last round of trade talks last week, US President Donald Trump said China is agreeing on a "very significant phase of a deal" that involves purchases of about $ 40 billion to $ 50 billion in agricultural products. Beijing has not yet publicly confirmed the figure.

China to buy agricultural products in the United States

The phased aspect of the deal is encouraging for the Chinese country, said Hay Wiven, a member of the executive board of the China International Trade Association, which

translated CNBC's remarks on in Mandarin, he said the Chinese would show their sincerity by increasing purchases of American agricultural products.

However, there is a catch. It is becoming increasingly clear that Beijing would like to insist that the US abolish the tariffs that apply to billions of dollars worth of Chinese goods.

"If China promised to buy agricultural products, but the US instead just delayed the additional tariffs," If we withdraw them, it doesn't make much sense for China, he said. "This is the defining moment."

On Thursday, Chinese Commerce Department spokesman Gao Feng stressed that Beijing would like the US to cancel any additional tariffs in order to reach a definitive trade deal. Gao noted that Chinese companies are increasing their purchases of US agricultural products in line with market needs and market-based principles, and that the two trade delegations remain in communication in hopes of reaching a phased agreement as soon as possible.

"I think there will be more talk about buying pork," he said earlier in the week, noting that he was not speaking on behalf of the Chinese government. soy deficiency is not so great. China can handle this by adjusting the feed formula. "

Soybean is used as animal feed in China, and the shrinking herd of pigs reduces demand for oilseed.

Chinese imports of American pork

Pork in the US 14% of Chinese meat imports through 2017, roughly the same as the previous year, according to a CNBC analysis of Chinese customs data by BRIC Agri-Info Group.

This portion dropped to 8% in 2018 when trade tensions escalated. last year's quarter fell to 2%, the analysis showed data show that US pork has regained market share of about 8%, still far from pre-trade levels. [19659002] US market share of pork imports in China,% by years [19659002]

Source: BRIC Agri-Info, Chinese Customs

This void potentially creates an opportunity for American farmers, such as those of Iowa's largest pork production company.

Pork prices will remain high for now

China's pork deficit is likely to persist for at least a few months, if not longer. China's Ministry of Agriculture and Rural Affairs said on Thursday that it expects pork prices to remain high during the New Year's holiday and spring festival in China at the end of January 2020, according to a press briefing from Wind Info's financial database. [19659002] Authorities also released pork from national reserves in an effort to alleviate the shortage.

Chris Rogers, an analyst at Panjiva Supply Chain Data Company, also noted that Chinese imports of US agricultural duties covered by remuneration duties rose 317% annually to $ 8.3 billion in August. "(The appreciation) suggests that Chinese purchases are already aggressively increasing even before the new deal is signed," Rodgers said.

However, it is not taken into account that China's increased need for pork will lead to more purchases from the US [19659002] "China will import from all its commercial suppliers, including the US, but the US price must also be competitive ", he said. "There are times when the price of the deal did not have competitiveness in the market and the company had to refuse the purchase."

Chinese pork producers, such as Muyuan, have also seen their share prices rise while traders are betting on higher profits.


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