August 16, 2021
Sizing Up China’s Pork Buying Spree
By David Widmar
One of the biggest trade stories out of China has been its recent record-setting pork imports. The primary driver for the uptick in activity comes as no surprise: African Swine Fever (ASF). After the first case was confirmed in August 2018, China’s domestic pork production has been severely affected in the months and years that have followed.
This week’s post steps back and sizes up China’s pork buying spree.
African Swine Fever’s Effect
Figure 1 shows China’s domestic pork production and consumption since 2000.
After decades of trending higher, China’s production and consumption of pork peaked in 2014, correlating with an uptick in beef consumption. From 2014 to 2018, the data were mostly unchanged.
ASF, however, created a significant supply shock as Chinese pork production plummeted from 2018 levels. In 2019, production was 21% lower than 2018 levels. The worst appears to have occurred in 2020 when production fell 33% relative to 2018. Conditions are expected to markedly improve in 2021 but still lag (19% lower than 2018 levels).
While the gaps between annual production and consumption have clearly been evident since 2019, data also reveal that China’s domestic pork production has lagged consumption for several years. Meaning: China has relied more heavily on trade.
Pork Trade Trends
Figure 2 shows USDA’s data on pork import and export activity in China.
Before 2008, China was a net exporter of pork. In fact, pork exports were nearly ten-times larger than imports in 2005.
In 2016, Chinese imports of pork reached nearly 2 million metric tons. As ASF shocked supply chains, China would import more than 2 million metric tons in 2019. In 2020, China imported 5.3 million metric tons of pork and is expected to import 5 million metric tons in 2021.
Figure 3 shows how significant China’s purchases have been on a global scale. First, the chart shows, in blue, the total amount of pork globally traded. Between 2016 and 2018, roughly 8 million metric tons were traded. In 2021, the global pork trade is expected to reach nearly 12 million metric tons. This is roughly a 50% increase in just a few years.
China’s Share of Pork Trade
China’s share of global trade is shown in orange. Prior to 2020, China accounted for as much as 25% of global trade. In 2017 and 2018, this slipped below 20%. However, in 2020 and 2021, China accounted for more than 40% of the activity.
While not shown, China has also accounted for an increased share of U.S. pork exports. Between 2014 and 2019, China accounted for an average of 11% of U.S. pork exports. In 2020, this hit a record of 33%. Further, U.S. exports to China increased 421,000 metric tons from 2019 to 2020. For the same time period, total exports increased only 303,000 metric tons. This means China not only bought more pork but also displaced other global buyers.
More broadly, U.S. pork exports in 2020 reached nearly 3 million metric tons, up nearly 22% from 2018 levels.
Wrapping it Up – What is the Future of China’s Pork Imports?
While there has been much excitement about China’s pork imports and, in turn, increased U.S. pork exports, the situation includes reasons to use some caution.
First, China’s purchases are in response to a significant and massive supply shock. All signs point to China’s rebuilding of pork production capacity, and the current estimates show some rebuilding is underway already. It remains an open question as to how quickly and significantly pork production recovers, but that recovery would result in less demand for imports in the future.
Second, China’s pork consumption trends aren’t what they used to be. Have a combination of consumer preference and demographics resulted in peak pork consumption? It’s probably too soon to tell, but the trajectories aren’t simply “upward,” as they were just 7 or 8 years ago.
In conclusion, it’s easy to get caught up in the excitement around demand from China. While there is a long-run demand story from China (read more: here and here), that doesn’t mean every situation from China is demand-driven.