U.S. farmers look past trade fears to cash in on China's hog crisis
WALCOTT, Iowa/LONDON (Reuters) - It might seem an unlikely time for U.S. farmers to look to China for more business but the devastating impact of African swine fever on the Chinese pork industry is trumping concerns about trade wars and tariffs.
Experts estimate the disease will wipe out about a third of China’s pork production this year, or 18 million tonnes. That’s twice the amount of pork exported worldwide every year and enough to feed U.S. consumers for almost two years.
The U.S. trade war with China initially forced U.S. pork exporters to scour the world for new markets but as the swine fever crisis deepens they’re gearing up for new opportunities to supply the Chinese market later this year and next.
The catch for U.S. hog farmers is that if they want to take advantage of the surge in Chinese pork demand, they can’t feed their pigs with the growth drug ractopamine which is widely used in the United States but banned in China.
In recent years, the European Union has provided roughly two-thirds of China’s pork imports, excluding offal, with Germany, Spain, the Netherlands and Denmark the main suppliers, according to Chinese customs data.
Potential demand is so huge, however, that the EU alone can’t satisfy it. U.S. producers of ractopamine-free pigs could benefit, either by supplying China or making up shortfalls in other regions targeting the Chinese market.
Sixth-generation Iowa hog farmer Mike Paustian would certainly like to benefit from producing pigs without ractopamine, even though it helps pigs quickly build lean muscle instead of fat.
Paustian said his buyer at Tyson Foods Inc. (TSN.N), the biggest U.S. meatpacker, was considering paying a premium for pork free of ractopamine, which is also banned in the European Union, and that could push some farmers to stop using it.
“That might be enough enticement,” Paustian said at his farm in Walcott, Iowa, that sells about 28,000 pigs a year.
Citing competitive reasons, Tyson declined to comment on whether it pays farmers more for pigs raised without the feed additive or if it was offering premiums. The company told Reuters it was looking at diversifying its pork supply to include ractopamine-free hogs as demand expands.