African Swine Fever epidemic could hit world dairy markets

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Rabobank is reporting that an unprecedented contraction in the supply of pork from China will have a spill-over impact on the international dairy sector as the threat of African Swine Fever (ASF) looms.

“The current ASF epidemic is expected to reduce China’s pork production by up to 35%, resulting in increased demand for other animal proteins,” explained Rabobank’s senior dairy analyst Sandy Chen.

“Rising demand for beef could constrain China’s milk production if dairy cow-culling accelerates to fill some of the gap in animal protein,” according to Rabobank’s senior dairy analyst Sandy Chen.

Her colleague Mary Ledman added: “The forecast reduction in China’s pig numbers converts into an estimated 54,500t to 72,500t decrease in lactose demand in piglet feed,

“The ASF situation in China has had a double impact on US whey, permeate, and lactose exporters as the world’s largest market for dairy-derived animal feed shrinks and US competitiveness erodes due to the trade war-induced tariff.”

China is the world’s largest pork producer, accounting for about 50% of total output globally. The current ASF epidemic is expected to reduce Chinese pork output by between 25% and 30%, resulting in a significantly reduced demand for animal proteins and animal feed.

Pig herd recovery in China could take a number of years, due to the threat of continuing ASF re-infection.

Rising demand for beef could constrain China’s milk production, assuming cull cow throughout rises in line with this demand.

However, fewer pigs means a lowering of demand for milk components, including milk permeate, whey permeate, whey powder and lactose. All of these dairy ingredients are used in pig production. A fall-off in demand will have a negative impact on dairy prices.

While lower Chinese milk production would normally have a positive effect on longer-term global milk prices, the larger downward pressure on whey complexes is expected to have a more immediate impact on international dairy prices. This will be most acutely felt in dairy exporting countries.

Between 2016 and 2018 China imported 530,000t of whey and permeate plus 84,000t of lactose annually for both feed and food purposes. Approximately half of these imports were destined for inclusion in pig rations.

With a much lower pig herd size now in place across China, the country’s import requirement for whey products and lactose will fall-off accordingly.