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African Swine Fever Could Swing China Negotiations in US Favor

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African Swine Fever Could Swing China Negotiations in US Favor

Trade negotiations with China are continuing daily by phone and video conference. No face-to-face meetings have yet been scheduled and Bloomberg reported this past week that the Trump-Xi signing summit wouldn’t happen until at least April.

Another factor hanging over these negotiations that could swing momentum to the US side is African Swine Fever. Arlan Suderman, Chief Commodities Economist with INTL FCStone, told HAT how big of a problem this disease has become in China.

“Our team in Shanghai tells us that they believe that hog feeding is down 20%. That they’ve liquidated 10 million sows, that compares to a breeding herd in the United States of about 6.3 million. So, that’s a major liquidation that’s taken place. Soymeal demand is down similarly.”

Suderman says the signs are pointing to China needing US pork sooner rather than later.

“Over the last week to 10 days we have seen a sharp increase in pork prices across much of China as tightness in supplies is now starting to develop. Initially we had a surge of supplies as producers liquidated their herds. Now we’re starting to see the tightness start to develop and that’s raising hopes that maybe we will see a significant uptick in imports of US pork, that’s yet to be seen, and probably or possibly poultry and beef as well.”

When I asked Suderman for a timeline of when US pork producers might see some Chinese buying, he said there are still some unknowns.

“What we don’t know is what is the size of the reserve? Has it already been used up, their pork reserve? Is that why prices are getting tight, or they simply need to speed up the reallocation of the reserve? That’s what we don’t know, that’s one of the wild cards, and it makes me a little bit reluctant to nail down a time frame.”

US Trade Representative Robert Lighthizer told lawmakers this past week a China deal is “50-50” right now. President Trump told reporters after that 50-50 is a good place to be in negotiations, and even if you’re better than 50-50 you don’t tell the other side- that’s the art of the deal.

“I think the deal is going to be made. I think there’s a very good chance it is going to be made, and I will say officially we’re doing very well in the deal.”