African swine fever (ASF) is still good news for New Zealand's red meat sector, says Rabobank's animal proteins analyst Blake Holgate.
Despite the substantial impacts of Covid-19, AFS remains the
dominant issue in global animal protein markets, according to Rabobank's report African Swine Fever: A Global Update.
And with ASF expected to tighten global pork supply in 2020, the New Zealand red meat sector will continue to benefit from the resulting strong demand for alternative sources of animal proteins.
The report says ASF is impacting pig herds and restricting pork production in a number of regions across the globe.
"China has lost several hundred million pigs to the disease over recent years – following a major ASF outbreak in August 2018 – and the disease has continued to spread in 2020, albeit at a much slower pace than previously" Holgate said.
"With a number of government policies released to encourage pork production, we expect the Chinese pig herd will rebound strongly in 2020. But with rebuilding efforts reducing slaughter numbers, we maintain our view that China's 2020 pork production will drop a further 15 to 20 per cent below the low level of production recorded in 2019."
The report says pork production in Vietnam and in the Philippines is also forecast to decline due to ASF, while concerns over further spread of the disease in Europe remain high.
"ASF outbreaks continue in both Vietnam and the Philippines and we expect to see a fall in pork production of close to 10 per cent in both these countries," Holgate said.
"In Europe, the potential for ASF spreading is high as disease pressure has not yet eased in Poland and Eastern Europe. While Belgium is making good progress in its efforts to contain the disease, there remains a risk of an ASF outbreak in a major European pork-producing country, such as Germany."
Listen to Jamie Mackay's interview with Blake Holgate on The Country below:
Holgate said in addition to lower pork production in countries impacted by ASF, Covid-19 was stifling pork production in other regions.
"While we had expected pork production to increase in North America, Brazil, and some parts of Europe this year, the impact of Covid-19 means we now expect constraints in all major producing countries," he said.
"We also anticipate that Covid-19 will reduce global pork consumption, however, in our view, this fall in consumption will not be enough to make up for the reduced production".
Chinese market remains the major opportunity for NZ
Holgate said the ongoing influence of ASF will continue to underpin Chinese demand for New Zealand sheep and beef exports, helping to offset any potential decline in demand from other markets due to Covid-19 lockdowns and/or slowing economies.
However, he cautioned that retail prices in China had softened across all proteins in quarter two, and were likely to remain under some pressure for the remainder of the year.
"Animal protein consumption in China has been weak so far in 2020 due to Covid-19 lockdown measures and, as a result, retail prices of all proteins have softened," he said.
"While consumption is expected to improve as foodservice sales recover, high unemployment and lower incomes are still likely to have some negative impact on prices of higher-priced proteins like lamb and beef".
Holgate said ASF outbreaks and reduced pork production in other regions outside China would have less direct impact on New Zealand's red meat exports.
"At present we don't export a lot of sheep and beef products into Vietnam, the Philippines or the eastern European countries where concerns over ASF remain high, " he said.
"That being said, the outbreaks in these countries will mean there is generally less animal protein available on the global market".