China is not self-sufficient regarding food production and thus heavily rely on importations. The tariffs imposed simultaneously by both the Chinese and US government on food products are reshaping the global market for wheat, pork, soybeans and even lobsters!
The Winners: Brazil and Argentina the new kings of soybeans supply
According to the Chinese General Administration of Customs, the country is the world’s biggest consumer of soybeans and imported 88 million tons of them in 2018. Soybean is a major source of protein for animal feeds and edible oil. However, in the turmoil of the fierce trade war going on between the US and China, China’s total soybean imports dropped 11.2% year-on-year in the first seven months of2019 to 46.9 billion tons, according to Chinese customs data. Brazilian and Argentinean farmers are the great winners of this bilateral war, becoming the new biggest providers of soybeans to China. About 66.1 million tons of China’s imported soybeans came from Brazil last year, accounting for 75% of the country’s total imports. That volume was 30% higher than the previous year. In regard, the US supplied 16.6 million tons of the soybeans, down 49% from a year earlier, a direct consequence on the tariff war.
China buyers toured soybeans production facilities in August looking for cheaper substitutes of US products and alternatives to Brazilian production. In the first half of 2019, the country imported 2.4 million tons of soybeans from Argentina, 10 times more than in the same period last year.
Within this context of the tense supply, the Chinese government is advocating to diversify sources of cooking oil and animal feeds in order to reduce dependence on soybean-based products, according to an expert close to the Ministry of Agriculture interviewed by Chinese media Caixin.
The losers: Chinese consumers facing an increase in pork price
Across China, pork prices have doubled since July, reaching a record high of 33 CNY (USD 4.64) per kilogram, surpassing any forecast. The last time pork prices reached similar levels, in June 2016, they peaked at 31.56 yuan per kilogram, according to the Ministry of Agriculture and Rural Affairs. The prices are not expected to decrease as pork is one the main product consumed during the coming festivities such as Lunar New Year holiday. Pork is by far the most popular meat consumed in China, and data from Beijing-based financial news outlet Caixin shows that each person in China consumes about 55kg of it every year. The sharp drop of pork supply caused prices to soar and led to growing public discontent.
According to Chinese officials from the Ministry of Agriculture and Rural Affairs, quoted by the South China Morning Post, “American pork imports account for less than 0.2% of Chinese output, so the trade dispute with the United States will have no impact on pork supply and pork prices in China”. It is true that China is currently experiencing an African swine fever epidemic that could wipe out half its pig population by the end of the year. Nevertheless, some measures took by the Chinese government have had undeniable effects on the pork supply: on September 1st, China imposed an additional 10 per cent tariff on US farm imports, leading to an increase of a 72 per cent duty for imported US pork. China also recently cancelled a large purchase of 14,700 metric tons of US pork. Germany, Spain and Brazil are now taking a growing part of this market.
The outsider: Canada now provides China with wheat and lobsters
As a sign of an increase in wealth of a part of its population, China has become the second larger importer of Maine lobster in 2017, a trend confirmed in the first half of 2018 with an increase of 169%. The Chinese tariffs hit this delicacy and Canada now provides lobsters to China, as those fished in Maine’s waters are the same species as the ones found in Nova Scotia and New Brunswick’s waters in Canada. American lobstermen don’t see any respite to come soon in the context of trade war between the first two global economies, whereas their Canadian homologue expect bigger paydays ahead.
As far as wheat is concerned, China bought 1.5 million tons from Canada from August 2018 through April 2019, nearly double the pace of a year earlier, according to Canadian Grain Commission data. In August, Canada’s share of total Chinese imports of wheat has rocketed above 60% in market year 2018/19, up from 32% on 2017/18, as US wheat exports to China have plunged. This soar of Chinese demand for Canadian wheat has not been affected by the political tensions between the two countries: this year, Canadian police arrested an executive with Chinese telecommunications company Huawei Technologies Co. Ltd. at the request of the U.S. Shortly after, China halted imports of Canadian canola, citing pests in some shipments, but the wheat demand continued to increase.