After having suffered massive losses of stock due to the outbreak of African swine fever in the country, China is desperately trying to find alternative sources of pork. Despite needing as many pork sources as possible, China is reportedly refusing to import US pork amid concerns raised by the now escalating trade dispute.
China has reportedly canceled a record amount of US pork imports, scrapping orders of close to 14,700 metric tons. As the trade war escalates, instigated by US President Donald Trump's recent announcement of additional tariffs on Chinese imports, China is now looking to other sources such as Brazil for its needs.
Data released on Thursday showed that US farmers had apparently built up their pork reserves in anticipation of the high demand from Chinese importers following the African swine fever outbreak in the region. Investors also expected a high number of pork exports given China's pork woes.
However, due to the rising tensions, the US may very well be facing a huge domestic surplus of pork. Around 25 percent of all pork produced in the US is meant to be exported to other countries, with China being one of its largest consumers. Given the large percentage of the production meant for export, the industry is particularly sensitive to any geopolitical disruptions.
Analysts have stated that the cancellation of the pork import is likely China's way of fighting back against Trump's promise to impose additional tariffs on Chinese goods. The cancellation has, of course, caused the entire hog industry to raise concerns, citing a large surplus of pork and massive loss of income if there are no large export programs put in place.
Hog-related stocks have plummeted following the news, dropping by as much as 17 percent late last week. According to the National Pork Producers Council, US hog farmers are losing around $1 billion annually due to the ongoing trade war. The group estimates that the quarrel with China is costing hog producers roughly $8 per animal annually.
So far, market experts have predicted bearish movement in hog-related positions. As the US hog industry attempts to find alternative buyers for its pork surplus, markets will likely continue to tumble as the US continues its spat with China.
If Trump will indeed impose the additional tariffs on Chinese imports next month, China will likely respond with the cancellation of its standing orders for other US goods. The tit-for-tat responses will undoubtedly result in billions of dollars in losses within various industries.
