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Pork sales and exports to China have surged higher in the last two years, with the focus of the China market before the COVID-19 pandemic squarely placed on the devastating outbreak of African swine fever throughout China and many other Asian countries, as well as other sectors of the world.

Anyone involved in the pork industry is keenly aware of the impact this had on domestic and global production. African swine fever (ASF) affected animal proteins, but also had a significant impact on the overall demand for corn and soybeans in China and other parts of the world due to significantly fewer hogs to feed as herds were culled and overall production levels diminished.

According to U.S Census Bureau trade data, pork and pork product exports to China in 2019 totaled over $1.3 billion. Meanwhile, the value of China imports of U.S. pork and pork products from January through October 2020 are over $1.9 billion, with the expectation that this value could surpass $2 billion by the end of the year.

To put this number in perspective, current 2020 exports are valued at 446% of 2015 levels and 334% of 2018 pork export values to the country. The decimation of China's hog herd due to ASF during the last two years has created a significant ripple effect through the global markets that is still being felt today.

It is estimated that nearly 50% of China's production has been affected by ASF, affecting world markets, but also significantly shifting world production and demand.

The scope of the Chinese pig population is hard to imagine. Even with these significant losses, total hogs in China is still over triple the total hog number in the United States and easily outnumbers the rest of the world production combined.

The availability of domestic hogs in China has dramatically affected price levels during the last two years. Currently, the national average live hog price is listed at 33.51 Chinese yuan per kilogram (equivalent to $2.33 per pound). These prices have fallen significantly from nearly 40 yuan/kg through the summer months. However, it is sobering to think that national average hog prices in China before the ASF outbreak consistently ranged from 10-15 yuan/kg ($0.69 to $1.04 per pound) during the last five years. The significant price surge in pork and the need to gain access to readily available supplies of protein to feed the Chinese population has led to an unprecedented surge in pork and beef exports to China.

As China seems to have been gaining increased control of its ASF issues, the country has been aggressively and systematically rebuilding its hog production infrastructure. This is being done by repopulating hog herds and importing quality breeding stock from around the world, but they're also focused on building larger and more efficient hog farms, which is expected to create significant production gains through the country during the next several months.

Over the last 10 to 15 years, the Chinese government has made efforts to aggressively grow domestic pork production through its country in order to become as self-sustaining in the pork market as possible; there is no doubt China has become even more adamant to do so following the ASF outbreaks that has crippled China's pork production and ability to feed itself.

The reduction of domestic pork production was not limited to changes in pork imports -- it also significantly changed the overall movement of grain product to China. Corn and soybeans continue to be the main source of feed products for the hog industry. With the developing trade wars during the last couple of years, there were significant reductions of grain exports to China. The reduced need for feed products, due to the struggling hog industry, also played a part in China's need to import less grain and feed products.

U.S corn exports to China in 2018 and 2019 were less than 40% of 2017 values, while soybean exports to China in 2018 and 2019 were 12% and 65%, respectively, of 2017 totals. The current strong buyer support of U.S. grain products during 2020 is expected to be partially due to the rebound in hog numbers, which are growing by double-digit levels in year-over-year comparisons.

The recent shift in pork production in China and subsequent change in buying patterns of U.S. pork supplies may be better compared to a "drought situation" seen in a grain producing country or region -- based on supply issues, rather than a change in overall demand. This is a concern for the U.S hog and pork industry, which has continued to ramp up in order to meet world demand of pork supplies due to ASF issues around the world.

If China can rebuild its hog herd and pork-production levels well above pre-ASF levels, the ability to clear current and future pork production in the U.S. may become even more difficult. These changes will likely be seen over several months to a couple of years, but the direction of production levels in the country should be closely monitored.

According to the latest USDA World Agricultural Supply and Demand Estimates (WASDE) report, projected 2021 pork production is estimated at 29.7 billion pounds, which is a 0.8% increase from expected 2020 production levels. Total global exports of pork from the U.S. are projected to increase 0.3% in 2021 from current 2020 levels. But if significant gains to Chinese pork production are realized in the coming months, these export numbers could significantly shrink, leaving significant domestic demand gains to pick up the slack.

Even with the growth in pork exports, and especially exports to China, it is important to remember that 75% of all U.S. pork is sold within the domestic market.

As 2020 draws to a close, COVID-19 will continue to significantly affect global and domestic pork demand, but China's commitment to rebuild its hog and pork industry remains a top priority. These two issues will create significant market uncertainty going into 2021 and likely become the major focus of the hog industry. U.S. hog and pork prices are, unfortunately, likely to remain extremely volatile for months to come.

Rick Kment can be reached at rick.kment@dtn.com

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