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Economy

China's deadly swine fever drives up global pork prices

Imports from US on track toward record despite tariffs as herds are depleted

Pork for sale at a market in Beijing. Pork is a staple meat in China.   © Reuters

BEIJING -- Pork prices in China are expected to reach new highs come winter as a nationwide swine virus outbreak thins stocks, likely pushing international prices higher as the country turns to imports to make up for the supply shortfall.

Wang Junxun, veterinary bureau deputy director at the Ministry of Agriculture and Rural Affairs, called the situation "grave" in a news conference on April 23. Herds in March were down 19% on the year, and the female population was down 21%, according to the ministry.

African swine fever is highly contagious and nearly always fatal to pigs -- though humans are not susceptible -- and has no vaccine or treatment. As concerns arose about the rise in international shipping potentially spreading the disease, China reported its first case at a hog farm in the Liaoning Province city of Shenyang last August.

Infected areas have been quarantined, and 1.02 million pigs have been slaughtered, but the outbreak has yet to be contained. Cases have been confirmed in all 31 of mainland China's provinces, autonomous regions and municipalities. Poor sanitation at rural farms likely contributed to the contagion.

The outbreak has pushed up Chinese pork prices. Prices for live hogs climbed to 15.1 yuan ($2.25) per kilogram as of April 10 from 11.9 yuan in late February. The disease struck just as the market was recovering this year from a slump in prices last spring that drove farmers to reduce their stocks.

The rapid depletion of pig herds has yet to fully translate into higher costs for consumers. Pig prices from October through December will likely surpass the record of 21 yuan per kilogram set in 2016, Wang said.

Pork is a staple of the Chinese diet -- so much so that authorities fear that a surge in prices could sow public discontent. The government set up a national pork reserve in 2007 as a precaution and has tapped it when prices run high.

Workers in protective suits at a checkpoint near a Chinese farm where African swine fever was detected.   © Reuters

Pork prices also affect the broader economy. The meat greatly influences China's consumer price index -- it is thought to constitute about 10% of the basket -- which has led to the indicator being nicknamed the "China pig index." The CPI in March climbed 2.3% on the year, with pork accounting for 0.12 percentage point of the increase.

An 80% jump in pork prices would push year-on-year CPI growth to 2.8% within the year, according to Guosheng Securities. Because the government targets consumer inflation of 3% or less, that could make it difficult to implement further monetary easing if the economy weakens in the second half.

Swine fever will likely impact the international market as well. China is the world's largest consumer of pork at 55 million tons a year, around half the global total, and will have to rapidly expand imports from Brazil and Europe to compensate for the reduction in domestic pig herds.

Chinese duties on American pork rose to 62% after Beijing imposed additional tariffs last July. Yet imports of U.S. pork in 2019 have already surpassed the 2017 total of roughly 170,000 tons and are expected to reach an all-time high of 300,000 tons.

"The price of imported pork in Japanese supermarkets will likely rise as the international market tightens," said Ruan Wei of Japan's Norinchukin Research Institute.

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