May 16, 2019

Brazil Anticipates Increased Meat Exports to China

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The ongoing problem with African Swine Fever (ASF) in China is opening up an opportunity for more exports of Brazilian meat to China. On her trip to China to promote Brazilian agricultural exports, Brazil's Agricultural Minister, Tereza Cristina, recently met with representatives of Rabobank to discuss Brazilian meat exports to China. Given the trade dispute between China and the U.S. and the problem with ASF, she is expecting that Brazil will increase its meat exports to China above the 915,000 tons of beef, chicken, and pork exported to China in 2018.

China continues to struggle to control the spread of ASF, which was first identified in China in August of 2018. Since there is no vaccine for the disease and the fact that the virus is almost universally fatal, once the disease is detected in a herd, all the hogs must be culled. Even with these extreme measures, controlling the spread of the disease has proved to be very difficult and it continues to spread in China and in neighboring countries.

Rabobank estimates that up to 200 million pigs have either died or have been culled due to the disease, which represents as much as 35% of China's hog herd. With that much of the hog supply eliminated, China will have to look to increasing their pork imports. Importing pork from the U.S. became more difficult with the increase in tarrifs. Brazilian pork imports face a tariff of 12%, which gives Brazil a competitive advantage.

Brazil's pork exports to China will not increase significantly overnight because it can take up to 1.8 to 2.0 years to ramp up hog production. Once investments are allocated, it takes a while to build the hog facilities, purchase the sows, grow out the pigs, and increase processing capacity.

As ASF continues to spread in Asia, it could take up to 5 years to rebuild the hog herds once the disease is under control, and at this point, it is unclear when that will occur. The disease is easily transmitted by contaminated feed, equipment, transportation equipment, shoes and clothing. Therefore, there is ample time to ramp up hog production in Brazil while China's demand for imported pork will remain high.

Brazil's poultry exports to China are also on the increase. According to Brazilian Association of Animal Protein (ABPA), from January through April of 2019, Brazil exported 153,300 tons of poultry to China, which represented an increase of 7.2% compared to 2018. China was responsible for 12.2% of Brazil's poultry exports during the period surpassing Saudi Aribia as the number one destination for Brazil's poultry exports.

In April alone, Brazil's poultry exports to China increased 19.9%. In addition to China and Saudi Arabia, other major importers of Brazilian poultry include Japan and United Arab Emirates.