Perth pork producers rebound into volatile new year after dismal 2019 Canada-China trade disruption
Updated: Jan 6
Canada’s pork industry was expected to do $1 billion worth of export business in 2019, but a discovery by Chinese authorities of ractopamine (a feed additive banned in China) in pork associated with fraudulent Canadian export documentation brought about repercussions that rippled back home this past summer.
In a response to emailed questions, the Canadian Food Inspection Agency (CFIA) said they “found concerns with the validity of the information” of an export certificate and were unsure of where the associated pork originated from.
At Beijing's request, the CFIA agreed to stop signing export documentation for pork and beef exports to China, effectively grinding to a halt new shipments to the country on June 25, 2019.
Prior to the suspension, pork exports to China were up over 2018. In May 2019, 44,185-tonnes were exported to China, a 72% increase from the 25,727-tonnes exported in May 2018.
Illustrating the lingering effect of the trade disruption, only 311-tonnes were shipped to China this past October, according to Stats Canada. That's a 99% decrease from the 24,457-tonnes shipped during the same time, the year before.
Perth County lays claim to the second largest area of pork production in Ontario, home to over half-a-million pigs in 2018.
Perth producers like Craig Hulshof, president of the Perth County Pork Producers, and Doug Ahrens, board director for Ontario Pork and the Canadian Pork Council, say they felt the effects of the trade disruption in a loss of $20 per pig.
Depending on how a producer is paid, either by farmer-owned collectives like Conestoga Meat Packers, or based off the Chicago Mercantile Exchange meat price, the hit could be even harder, amounting to hundreds of thousands of dollars.
Making matters worse is an 18-month U.S.-China tariff spat, that has seen duties of up to 72% applied to U.S. pork imported into China, resulting in a surplus of pork in the North American market, driving down prices.
“We’ve been collateral damage way too often in the last three or four years,” Mr. Ahrens who also runs Ham Land Acres, a 15,000 head operation in Sebringville, Ontario, said.
After being sidelined for four months, the industry breathed a collective sigh of relief this past November, with an announcement from Prime Minister Justin Trudeau that pork and beef exports to China had resumed.
But the trust in China as a reliable trading partner has been soured among producers. In a world revolving around global trade, to be a farmer is to exist in a constant state of flux.
Stewart Skinner of Stonaleen Farms in Listowel says he’s been getting $30 under his cost, per pig. Stonaleen outputs around 25,000 total pigs each year.
Hog farming is cyclical, says Mr. Skinner. Some years make money, some don’t. Heavily reliant on stable export markets, he’s resigned to accept an increasingly irritable global market as the new norm.
Mr. Hulshof echoed a similar sentiment: “It really makes us kind of stop and rethink what our business plan is and how we should respond to the new world order in trade,” he said.
Ted Bilyea is quick to note China didn’t simply shutter their borders to Canada.
Mr. Bilyea is a former chair and advisor for the Canadian Agri-Food Policy Institute (CAPI) and after 35 years with Maple Leaf Foods, retired as an executive vice president. He believes Canada would have responded the same way if the shoe were on the other foot.
“It doesn’t matter whether it’s a spelling error, or a completely goofy certificate,” Mr. Bilyea explained. “Everything has to be letter perfect, or it’s not good and that’s the reality.”
Before China detected traces of ractopamine, simmering in the background were prior issues with labelling; China banned imports from two Canadian packagers months earlier.
It’s something Gary Stordy, the director of government and corporate affairs for the Canadian Pork Council, is forthcoming about, saying that labelling errors were increasing China’s frustrations with Canadian imports.
Mr. Stordy recently returned from a trip to China where he visited with customers, importers and brokers, hoping to rebuild what he called “ignored relationships.”
“There’re steps underway to improve the process and the required documents, we will also be working more closely with Chinese counterparts to build those relationships so we are more aware of problems ... that’s our commitment to moving forward,” Mr. Stordy said.
As for what steps have been taken, the CFIA would only say they’ve provided proof to reassure China of the integrity of Canada’s food inspection system, citing the protection of the “integrity of its systems and safeguards” for not providing further information.
An investigation by the RCMP is being carried out to determine where the pork with fraudulent Canadian documentation originated from.
Dealing with China is difficult, says Gordon Houlden, a political science professor and director of the China Institute at the University of Alberta.
Mr. Houlden spent 22 years in the Canadian Foreign Service working on Chinese affairs for the Canadian government and recently returned from a trip to China this past November, where his delegation met with the Chinese People’s Institute of Foreign Affairs.
Mr. Houlden believes rules supporting international free trade for all are the way to go, decrying what he called a “mania for tariffs,” though he says there isn’t an appetite for a free trade agreement with China.
He finds issue with the rhetoric of getting tougher by leveraging supply, saying that while Canada could stop exports and cause some pain, ultimately China doesn’t respond well to pressure and it wouldn’t solve our problems.
“We live and die by our exports,” Mr. Houlden remarked.
Our best play, Mr. Houlden says, lies in strengthening relationships on the ground in China.
Since December 2018, Canadian’s Michael Kovrig and Michael Spavor have been locked up in China on what are widely perceived to be bogus charges of espionage, in retaliation for Canada arresting Meng Wanzhou, the CFO of Chinese telecom giant Huawei, last year for extradition to the United States.
Lu Kang, China’s Foreign Ministry spokesperson, called the detention of Ms. Wanzhou a “severe political incident” in a March 2018 statement.
Canada’s former ambassador to China, John McCallum, believes China needs the pork because of a dramatic reduction of its own stocks, not because it’s cozying up to Canada.
“They will put their own interests, notably the Meng Wanzhou case, ahead of other things,” Mr. McCallum said.
In August 2018, African Swine Fever (ASF), a virus causing pigs to bleed out internally, moved into China.
Dutch-based Rabobank estimated China’s herd at 360-million pigs in 2018. In an August 2019 report, the bank predicted it would take five years before pork production could recover, estimating that China had lost 40% of its herds (144-million pigs) and that losses could rise to half by the end of 2019.
China produces around 50% of the world’s pork and consumes just as much. The deficit in supply has lead to skyrocketing domestic prices and an insatiable demand that can only be fed by a global market where ASF has made its mark in at least 50 countries, and is predicted to wipe out a quarter of the world’s pigs.
The Chinese Lunar New Year is approaching at the end of this month, and demand will soon be at its highest. According to a December 12, 2019 report from the Food and Agriculture Organization of the United Nations (FAO), China released 36,286-tonnes of frozen pork from its Central Reserve in anticipation.
The Great Chinese Famine of 1959-61, during which upwards of 45-million people died, is surely echoing in the mind of a Communist government which recently celebrated 70 years in power and relies on satiating a middle class that makes up around 39% of a burgeoning populous of 1.4-billion.
As ASF continues to move throughout China — there were up to 44 ongoing cases reported as of December 5, 2019, according to the World Organization for Animal Health — the Chinese government wants to move away from backyard pork production riddled with biosecurity issues, toward large-scale production. Even so, the Chinese population will have to satisfy increasing protein demands in previously unconventional sources, like poultry and beef.
According to the FAO, the Chinese Ministry of Agriculture and Rural Affairs released an ambitious “three-year action plan to accelerate the recovery and development of pig production” this past December. It calls for: the stoppage of pig decline, curbing rising pig prices by end of 2019, stabilizing pork supply through the Chinese New Year, and to recover full production capacity by 2021.
Mr. Bilyea, the former CAPI chair and advisor, has strong doubts about China’s ability to return to self-sufficiency.
“What they know they can do, and what they say they can do publicly are two different things,” Mr. Bilyea said.
He went on to say, “Canada can play a role here, but I think we have to choose what role we’re going to play, and there’s not a lot of deep thought going into this.”
China is Canada’s third largest export market for pork behind the U.S. and Japan, having accounted for $514-million in 2018 pork exports. And Ontario’s prices, on average, have actually been up on a month-by-month basis compared to 2018, according to numbers provided by Agri-Food Canada.
Ontario’s estimated, average year-end price for 100-kg of pork in 2019, is $197.06, up from $181.83 the year before.
As of December 7, 2019, Ontario’s price was $191.13, up from $169.86 the same time last year, according to data compiled by Agri-Food Canada.
Despite tanked exports, some local producers say they’re starting to notice a rebound of $5-6 on their price, but a clearer picture won't emerge until February or March of this year.
This month will be telling for Canada-China relations. Ms. Wanzhou’s extradition hearing is scheduled for early January, beginning what could be a years-long process. This past December, China and the U.S. also reportedly agreed on a “phase one” trade agreement which suspended tariffs scheduled to take place on some Chinese goods, while reducing others, in exchange for China agreeing to purchase an unconfirmed amount of U.S. products.
The agreement is expected to be signed this month, which would affect Canadian trade once again if China does begin directing importers to buy from the U.S..
Further complicating the story, is the potential for ASF to make its way into Canada, something the CFIA says they’re taking “unprecedented prevention and preparedness” measures against.
In March, 2019, the federal government announced $31 million for detector dogs to intercept illegally imported meat at Canadian airports.
The repercussions of ASF in Canadian herds would be devastating, severely hindering our strength of being able to export to anywhere in the world, at a time when Canada evidently needs to diversify its markets. ♢ This article originally appeared in the Listowel Banner on January 2, 2020 under the headline: Perth County pork industry continues to feel effects of 2019 global trade disruption.