Despite all the attention given to COVID-19 at the moment, we still believe that African swine fever remains the dominant issue in global animal protein.
While COVID-19 has definitely had an impact on beef trade with the reduced sales through restaurants and other foodservice, and the slowing economy, ASF continues to leave a gaping hole in China's protein supplies, supporting import volumes.
Last year, we saw China's pork production drop about 20 per cent, following the large-scale culling of pigs and sows to try to control the virus.
This year, with ongoing low sow numbers, we believe pork production in China will again fall by between 15 to 20pc.
That means China's pork production is expected to decline by about 20 million tonnes since 2018. It's a bit hard to comprehend how much that is when it is just a number.
To put it into context, Australia produces a total of about 4.5 million tonnes of beef, sheepmeat, pork and poultry every year.
The US, the second largest pork producer in the world, is expected to produce close to 13 million tonnes of pork this year.
A gap the size China is facing cannot be filled. But it does mean China will look to import more protein, which includes beef from Australia, and from other countries.
At the end of last year, we saw this Chinese demand for imports in full swing. Our exports to China in the months of September, November and December more than doubled.
This increased demand pushed export prices to high levels - the US imported price for lean trimmings reached the record levels seen back in 2014.
Then came COVID-19, taking the wind out of the sails. But the supply gap in China remains and we are still seeing this underlying demand in Australia's beef export volumes.
With total Australian production volumes down given the depleted cattle herd and improved seasonal conditions, and COVID-19 disruptions to foodservice trade, we see Australian total export volumes are down 3pc for the year-to-date (May).
But exports to China are up 9pc. Even better, the average per unit value of those exports to China are up 4pc year-on-year (April).
ASF in China continues to mean prices for protein remain high. Chinese retail prices for pork in May were 88pc higher than in May 2019 and beef prices at CNY 81.99/kg (AUD 17.23/kg) are 19pc higher than they were last year.
The shortage of protein and the higher prices will test Chinese consumers with forecast weaker economic conditions. However, we believe despite prices being under pressure, they will generally be supported.
