African swine fever has wiped out close to 60% of China’s pig population, which will have a big impact on the global pork supply chain given that China is home to half of all the pigs on the globe.

The immediate impact has been a massive reduction in hog numbers across the country and a halving of breeding numbers due to a wide range of culling of animals going into the slaughterhouse. Some provinces have felt the worst and been more exposed to the culling than other provinces. Losses in Sichuan, for example, have been estimated at 60%, Hebei at 70%, and Henan at 80%. Those provinces with the highest numbers of small backyard farms have been the most severely hit. This article examines the impact that African Swine Fever will have on China’s hog and feed industries and the implications for China.

African Swine Flu (ASF) is not a new disease and is spread by the virus residing inside pork products, like pigs and contact of pig products (e.g. pig manure). ASF has been around in Europe since 1957, and whilst it has since been eradicated there, it has reared its head again in other regions. It is quite a resilient disease and one that can cause devastation when it hits into a peak farm, with the ability to cause high levels of mortality. There is no vaccine for it yet, nor any antibiotics that can protect an animal.

Before the outbreak of the disease in China, approximately 40% of pork production was still being produced in small farms. Yet due to poor biosecurity measures, especially in those small farms, the disease has spread rapidly across the country. This is being attributed to such factors as contaminated human feed for pigs, transportation management, the management of people coming onto the pig farms, and the management of the pigs themselves having access to farms.

The Chinese government has put in place a number of measurements in order to contain the outbreak. 

Firstly, the government put a culling policy in place, in that if any evidence of the disease was found, all pigs within a 3-kilometer radius of that disease needed to be culled. Compensation was supposed to be equivalent to about 75% of the slaughter value of the pigs, however, because reports of lack of payments were circulated, some farmers preemptively slaughtered pigs in order to be sure to recoup some value – hence the reason for such a rapid cull taking place. The government has also put a stop to the movement of live pigs, especially for the testing of the disease. Further, the government required that all pork in frozen storage would need to be tested before its release.

Over the past few weeks, however, a government policy change took place to encourage the rebuilding of the Chinese hog herd by making significant subsidies available for the expansion of farms. An easing of restrictions on environmental barriers for the entire livestock industry was also announced, meaning pre-approved land can now go straight back into being hog farms.

The effect of the outbreak is a dramatic price increase in the short to medium term. All breeding stock companies are reporting that they will be sold out of pigs until Q3 2020. The prices for young pigs remain extortionately high. These young pigs will be used to restock the herd, but in the meantime,  it will probably take approximately 18 months before the next large-scale slaughter of pigs. Prices are expected to maintain their heightened levels until the middle of 2021, and it is not expected that global supply will be able to satisfy Chinese demand.

This increase in price will have a lasting effect on Chinese farming infrastructure in terms of the creation of larger, vertically-integrated farms. Massive profits stand to be made, mostly by larger farmers who have the means to implement better biosecurity measures. The four top farming firms, consisting of New Hope, Jiangbang, Wenz, and Muyang, are publicly stating their plans to expand at a rapid rate across the whole of China. It is expected these top four farms will control up to 8-12% of the industry in the future, with other larger farms controlling between 40-60% of the industry.

Because pork is such an important commodity in China, the Chinese government is extremely worried about the impact high pork prices will have on the stability of the country. Experts believe the government will most likely increase supply rather than control restrictions, therefore, China is looking to the US for increased imports of pork. With improved biosecurity measures put in place, however, it is hoped that China will soon be able to get through this ordeal as have countries such as Russia done before it.

This call was hosted on September 26, 2019, under the title: “African Swine Flu – Rebuild Begins.” 

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