The unprecedented contraction in the supply of pork from China, due to African Swine Fever, will have a spill-over impact on the global dairy sector, according to a new report from global agribusiness banking specialist Rabobank.
The report, African Swine Fever losses to complicate the global dairy complex, says with the current African Swine Fever (ASF) epidemic expected to reduce China’s pork production by up to 35 per cent, there are both positive and negative price implications for global dairy.
A resulting rise in demand for beef in China could see an increased culling of dairy cows to fill some of the gap in animal protein supply, constraining China’s milk production and putting positive longer-term pressures on global milk prices.
However, with China the world’s largest pork producer – accounting for approximately 50 per cent of global pork production – and the world’s largest market for dairy-derived animal feed, the decline in feed demand is expected to have a more immediate negative impact on farm-level milk prices in key exporting countries, the report says.
For Australia though – while the rapid pace of the ASF epidemic in China presents a risk factor for the global dairy outlook which needs to be watched – the overall global fundamentals in the dairy market remain firm and supportive of higher milk prices in the coming season in Oceania, according to Rabobank’s Australian senior dairy analyst Michael Harvey. And at present, the bank has not altered its view of global and local milk prices.
“A potential upside factor resulting from African Swine Fever remains the impact on Chinese milk production and whether increased imports will be required to meet Chinese dairy demand,” he said. “While another spin-off benefit for local dairy producers could be the potential for Oceania beef prices to increase on a rising tide of protein prices globally – a factor that would add to their businesses options.”