Pork exporters to China will have a 'huge advantage' for the next year or two, analyst says

• Pork exporters to China are set to gain a "huge advantage" as the gap in pork production caused by African swine fever is likely to continue for the "next year or two," according to an analyst.
• "The exporters are really in good shape because the hole in the Chinese production is so large because of African swine fever that if you have meat anywhere in the world, the Chinese want to buy it," said Richard Herzfelder, senior advisor at GIRA Consultancy & Research.
• With current prices of pork at three to four times breakeven, the prospect of high profits are attracting enormous investments into the Chinese pork industry, Herzfelder noted.

Pork exporters to China are set to gain a "huge advantage" as the gap in pork production caused by African swine fever is likely to continue for "the next year or two," according to an analyst.

"The exporters are really in good shape because the hole in the Chinese production is so large because of African swine fever that if you have meat anywhere in the world, the Chinese want to buy it," said Richard Herzfelder, senior advisor at GIRA Consultancy & Research. 

Currently, 20 overseas markets, including the U.S., Canada and the European Union, are approved for exports of pork to China, according to U.S. Department of Agriculture data.

The infectious swine disease has damaged and reduced the domestic supply of pork so much that, even with Covid-19 hurting demand, pork prices are still twice what they were two years ago, Herzfelder told CNBC's "Street Signs Asia" on Wednesday. 

The outbreak of African swine fever, first reported in China in August 2018, has wiped out Chinese hog herds, leading the world's largest pork producer and consumer to ramp up imports as pork prices spiked.

That upward trend in price was also in part extended as the coronavirus spread in the mainland.

Chinese hog prices were 81.7% higher in May year-on-year, despite a 8.1% drop from April. In the first four months of 2020, Chinese imports of pork were up 170% compared with the same period a year ago, Reuters reported citing customs data. U.S. exports of pork to China also hit an all time high in April of 112,327 tonnes, according to a separate Reuters report citing U.S. Census Bureau data.

Both the U.S. and Brazil shut down various meat processing plants after workers tested positive for the coronavirus. But GIRA's Herzfelder said the extent of the Chinese hole is "so big" that China will still "try to suck in as much (pork) as they can.

With current prices of pork at three to four times breakeven, the prospect of high profits are attracting enormous investments into the Chinese pork industry, Herzfelder noted.

That much investment will likely lead to overproduction in "probably two or three years," causing import demand to suddenly "collapse," he said. 

But in that two to three years runway, Herzfelder sees exporters making "a lot of money."