May 28, 2008

 

Sichuan earthquake to give further impetus to China's pork imports 
   
  

China's pork imports are expected to remain strong and prices high throughout 2008 after the earthquake that shook Sichuan province, according to a USDA report.

 

Pork production is expected to decline 2 percent to 4 percent in the region as a result of the earthquake, putting slight upward pressure on nationwide pork prices, the USDA attache report posted on the Foreign Agricultural Services Web site said.

 

A magnitude 8.0 earthquake in Sichuan on May 12 damaged some major production areas.

 

The earthquake is being called China's worst disaster since a 1976 earthquake killed more than 250,000 people in Tangshan City, Hebei Province. The damage from the earthquake is expected to slow China's total GDP growth slightly in 2008.

 

Strong domestic consumer demand, short domestic supplies and the desire to guarantee adequate strategic reserve levels are expected to strengthen imports and support prices, the report said.

 

However, domestic pork production is expected to rebound in six to eight months. The earthquake will likely be a contributing factor to agricultural price increases of 10-20 percent over the summer, the USDA said.

 

Sichuan is China's largest swine and pork producing province, and accounts for 12 percent of China's total swine inventory, 11 percent of slaughter, and 10 percent of total pork production. The province slaughtered 71.1 million head of swine in 2005 and the figure rose to 74.7 million head in 2006.

 

Pork production in Sichuan was 5.1 million tonnes in 2005 and 5.4 million tonnes in both 2006 and 2007, respectively.

 

According to Vice-Minister of Agriculture Wei Chao'an, the impact on agriculture includes the destruction of 12.5 million head of livestock, mostly poultry. According to China's swine industry, the earthquake has impacted four to five million pigs in the disaster area, with most being killed by the earthquake, but some also expected to starve or be slaughtered due to lack of feed supplies.

 

Local industry reports that swine and pork production in Chengdu and Mianyang have been impacted significantly. Feed and food processing plants in these and other affected areas have halted production due to the disruption of water and electricity supplies.

 

Chengdu and Mianyang are both in the immediate earthquake zone. Mianyang is a swine production base, while Chengdu is important for both swine and feed production. Disruption in the transportation infrastructure has resulted in shortages of feed and other inputs.

 

As transportation facilities, vehicles and warehouses are dedicated to the relief effort, the immediate impact of the earthquake may lead to more protracted problems.

 

China's pork production in 2007 has already declined nine percent from 2006 due to high production costs, inflation, natural disasters, and animal diseases.

 

As large numbers of backyard operations withdraw from production and commercial sized operations struggle to fill the supply gap, China's 2008 pork supply is expected to remain very tight as production recovers slowly. Currently, 50 percent of swine are raised in backyard or small-sized farms versus over 70 percent in 2005, the USDA report pointed out.

 

Meanwhile the USDA report assessed Chengdu's transportation infrastructure is damaged but intact.

 

Water resources remain generally available but there are conflicting reports of damage to dams in the affected region that protect against flooding and provide irrigation and hydroelectric power. Electrical power in Sichuan is mostly provided through hydroelectric stations,

 

The report also highlighted that initially, local pork prices are expected to decline slightly as swine are liquidated because of lack feed or water. During the relief period, the government is expected to cap pork prices. After the initial earthquake recovery through June, local prices are expected to rebound and put slight upward pressure on pork prices nationwide.

 

While not the dominant factor, the earthquake is expected to be a contributing factor to price increases of 10-20 percent over the summer.

 

Impact on Pork Trade
 

China's pork imports in 2008 exploded as a result of strong demand.. Imports of pork from January to March 2008 increased to US$121.6 million, up from US$7.5 million in 2007, while imports of variety pork meat have increased to US$142.6 million, up from $74.2 million during the same period in 2007.

 

US exports to China account for 68 and 24 percent of China's total pork and variety meat imports, respectively. The USDA forecasts the US will remain the largest supplier to China for the remainder of 2008.