China is loading up on U.S. pork, despite import tariffs imposed due to the trade war, as a highly contagious swine disease ravages the Chinese hog herd.
The world’s top hog producer and pork consumer last week placed its largest order for American pork since the trade war began, U.S. Department of Agriculture data showed on Thursday.
The purchases are a signal that an outbreak of African swine fever is raising concerns of an eventual supply shortfall, potentially superseding trade tensions between the world’s two largest economies, brokers and traders said.
“It’s kind of like, why do you buy from your enemy? Because you have to,” said Don Roose, president of Iowa-based broker U.S. Commodities.
China has imposed retaliatory tariffs on imports of U.S. farm products in the tit-for-tat trade row, including duties of 62 percent on American pork.
U.S. President Donald Trump and Chinese President Xi Jinping are scheduled to meet on Saturday at the G20 summit in Buenos Aires to discuss trade amid increasing tensions.
China in the week ended Nov. 22 bought 3,348 tonnes of pork to be shipped this year, USDA said, its largest purchase for the current season since February.
China also bought 9,384 tonnes of pork for shipment next year, accounting for 72 percent of the total weekly sales to all countries.
Combined, they were the biggest weekly sales to China since April 2017, sending U.S. hog futures LHG9 up more than 4 percent.
The deals come as China may buy pork for its state reserves to support farmers struggling to sell pigs during the African swine fever epidemic.
“Pork is abundantly supplied right now in China; prices are low. That doesn’t mean there will be plenty of pork in China next year,” said Brett Stuart, president of U.S. advisory Global AgriTrends.
The sales could benefit pork exporters such as WH Group Ltd’s (0288.HK) Smithfield Foods and Seaboard Corp (SEB.A).
Smithfield Chief Executive Ken Sullivan said in October that African swine fever could roil global pork markets.
China has suffered more than 70 outbreaks of the disease, which kills pigs and has no cure or vaccine.
Chinese pig farmers have started to get rid of animals to cut their losses after prices dropped when Beijing banned the transport of live pigs from infected regions.
“Basically every hog that’s culled or killed to try to control this disease is a hog that has to be imported,” said Dennis Smith, a broker for Archer Financial Services in Chicago.
Source: Reuters
