Pork prices set to soar on China swine fever outbreak

748

Farms swamp market with culled carcasses as disease threatens one-third of country’s 400m pigs

African swine fever took a while to arrive in the green hills of Guangdong, in southern China. But when it did it came with a vengeance.

The first government-confirmed cases appeared late last year. Authorities responded by culling more than 6,000 pigs and offering farmers compensation — the playbook developed elsewhere in China, where the disease has ravaged the country’s once 400m-strong pig population. There have been no official cases confirmed in Guangdong since Christmas Day. Yet a trip to the outskirts of Guangzhou, the province’s flourishing capital city, shows the difficulty of containing the disease.

As ASF has spread further south in China and on into south-east Asia, questions have arisen whether Beijing’s response inadvertently helped to compound the problem and flooded domestic markets with potentially contaminated meat. “No pigs here, they’re all dead,” said the groundskeeper at the otherwise empty grounds of Guangzhou City Fine Breed Pig Farm.

An outbreak of the virus hit the compound in March, he said. Fine Breed is not the only farm with an unacknowledged outbreak; analysts say farmers in China have taken to sending entire herds to the slaughterhouse at the first sign of ASF, rather than report to the government and receive too little compensation. The resulting oversupply helps explain why, after nine months of government-ordered culling, domestic pork prices have not jumped due to shortages, whereas global markets have reacted sharply. Spot wholesale prices for Chinese pork have risen only about 8 per cent since August, while Chicago hog futures are up more than 35 per cent. “At the local level there are strong incentives not to report cases,” said Ernan Cui, China consumer analyst at Gavekal Dragonomics in Beijing. Ms Cui said the impact on pork prices from so-called “panic slaughtering” usually finished working through markets around six months later. She tipped pork reductions from the latest round of killing, which began sometime in December, to become evident in the second half of 2019.

ASF, which is fatal to pigs but harmless to humans, showed up in north-east China last August, following outbreaks in Siberia the summer before. Once it had a foothold in China the disease swept swiftly south, reaching Hong Kong in May. This month, epidemiologists told Science magazine that it would soon surface in Myanmar and Laos, with the potential to become an epidemic in south-east Asia. In February, pig breeder Sun Dawu in Hebei province took to Chinese social media to insist that he had lost 15,000 hogs to the disease. “We believe it’s African swine fever . . . please will the government give us a way out!” his staff wrote on a banner in a photo posted online by Mr Sun, along with a gruesome photo of piles of dead pigs. Mr Sun’s case is one of the few known to have received confirmation from China’s Ministry of Agriculture after initially being rejected at the local level.

This year, a third of China’s national pig stock, the biggest in the world, could be wiped out by the disease, according to Rabobank estimates, sending shockwaves through protein markets across the globe. John Lin, portfolio manager of China equities at fund manager AllianceBernstein, said expectations of better margins had boosted the share prices of Chinese pork producers listed onshore, such as Jiangxi Zhengbang Technology, which has more than tripled so far this year. While shortfalls would probably drive Chinese consumers to eat more alternatives such as soyabean-based tofu, he said, “ironically demand for [products like soya] will actually go down because you have a lot fewer hog mouths to feed”.

Part of the reason for the fever’s rapid spread in China may have been a poorly designed compensation scheme. When the disease first appeared, authorities ordered herds to be culled and, in an effort to ensure farmers reported outbreaks, ordered payments of Rmb1,200 ($174) a head for those who lost animals. However, cash-strapped local governments balked at paying out so much, forming a perverse incentive for farmers to sell their herds as soon as one pig fell ill rather than report outbreaks and risk a heavier loss.

Dirk Pfeiffer at the Chinese University of Hong Kong, who studies the disease and trains veterinarians in China, said a lack of transparency on domestic outbreaks had turned the situation into “a complete fog”. At the Guangzhou Fine Breed farm, educational posters exhort the culling and disposing of afflicted pigs. But the groundsman was adamant: “We sold them!” Butchers at wet markets in Guangzhou, equally, insisted that their meat passed muster. “It’s been inspected — inspected!” said one butcher near the city centre, thwacking his hand against government-issued papers for emphasis. Yet expectations of higher pork prices have begun boosting interest among farmers, Ms Cui said, as evidenced by the price of piglets climbing rapidly since March.

When the shortage hits, said Mr Lin, China will pull in pork from the rest of the world, and poorer countries from Brazil to Bulgaria will feel the squeeze from higher prices. “There simply isn’t enough animal protein in the world to fill this void.”