In the Year of the Pig, China is facing a pork crisis.
Up to 200 million hogs could die, or be culled, this year after contracting African swine fever as the disease sweeps through the world’s second-largest economy.
The epidemic will also force up pork prices by 70%, according to a senior Chinese official who declined to be named.
Last month, a report by Nomura backed up that assessment. The Japanese bank warned that prices could rise 78% to 33 yuan (US$4.90) per kilogram by January 2020 from February’s figure of 18.5 yuan-per-kilogram.
“Despite the rise in pork prices, pig farmers may be reluctant to increase hog stocks on concerns about [African swine fever],” Nomura’s analysts said in the study.
“In this regard, the upturn of the hog cycle could last longer and drive pork prices higher than in previous hog cycles,” they added.
Reports about the highly-contagious virus have been sketchy in China’s state-run media for fear of triggering panic buying. Even the official statistics are vague.
Last week, the Ministry of Agriculture and Rural Affairs confirmed that China’s sow population had plunged 21% in March compared to the same period in 2019.
But detailed numbers were missing from the statement.
“Second quarter [pork production] will see a marked drop from the first quarter, and the third quarter could be even bigger,” Feng Yonghui, the chief analyst at industry website Soozhu.com, told Reuters.
Swine fever
The full impact of African swine fever in the pig industry was first highlighted in a report by the United Nations Food and Agriculture Organization’s regional office for Asia and the Pacific. “[There is a] major threat to the swine industry in China and to the livelihoods of small-scale farmers and others along the value chain,” the study stated.
“Because pork is produced and consumed by so many Asian countries, particularly in East and Southeast Asia, the introduction of the virus to other countries of the region is a near certainty,” it added.
“In its most virulent strain, it is 100% fatal to infected pigs. However, unlike swine flu, ASF [African swine fever] poses no direct health threat to humans.”
The depth of the crisis has also been highlighted in a study by Rabobank, which has predicted that the ASF virus could wipe out between 150 million and 200 million pigs in the world’s second-largest economy.
Fallout from mass infections would result in a 30% drop in pork production.
Back in November, China’s Agricultural Ministry rolled out stringent hygiene measures in an effort to halt the spread of ASF.
At least 18 provinces were reported to be affected, resulting in the death of 200,000 pigs – a figure which analysts believe is just the tip of the iceberg.
Then in March, pork prices jumped 5.1% compared to the same period in 2018, according to data released by the National Bureau of Statistics.
The NBS also revealed that China’s pig population had declined by 10.1% to 375.25 million hogs.
Considered a staple in the food chain, further dramatic increases will set off alarm bells in Beijing as the country celebrates later this year 70 years of Communist Party rule.
Rising anger on social media sites will be closely monitored and pork imports will increase to beef up dwindling domestic stock.
Global supply
Since half the global supply is bought by Chinese consumers, the ramifications of a pork shortage cannot be overstated.
“The key question … is what is the true severity of China’s African Swine Fever outbreak? And, actually, no one, not even Beijing, knows the answer,” Rory Green, an economist at TS Lombard, said.
“Chinese authorities have actively downplayed the severity of the disease. Meanwhile small and medium-sized farmers are incentivized to hide [African swine fever] outbreaks for fear of massive livestock and commercial losses. The result is at best [a] murky picture of the domestic pork market,” he told CNBC.
But China is not the only country hit by the ASF virus.
The deadly disease has also broken out in Vietnam and Cambodia, while there are concerns it could spread to Thailand.
“Based on the commonalities with Chinese production, we expect these markets to suffer sizeable ASF herd losses [on a percentage basis] and experience similar difficulties in disease containment,” the Rabobank report pointed out.
“Much of Southeast Asia will have difficulty repopulating its [stocks] and securing provisional protein supplies. ASF losses in Southeast Asia will exacerbate global protein shortfalls, adding further upside pressure to global markets,” it added.
The Year of the Pig is quickly turning into the Year of the Crisis.