China's diners must pay more for their favourite meat or forgo pork at mid-autumn as swine fever decimates supply


As mid-autumn celebrations get under way, dining tables across China will be paying more for their favourite pork dish, or looking to substitutes, as the country's biggest outbreak of a hog disease decimated the meat's supply and caused prices to soar.

The price of pork - steamed, fried, barbecued, boiled, stewed and cooked in a myriad of ways - jumped 46.7 per cent in August compared with last year, as African swine fever sent China's favourite meat into a severe shortage. The price of pork, at an eight-year high, fuelled the overall cost of food to a 10 per cent gain, which propelled China's August inflation to accelerate by 2.8 per cent.

Expensive pork, which makes up two-thirds of the annual meat consumption for the average non-Muslim Chinese household by one estimate, is forcing consumers to make hard choices: pay more, or eat less of the meat.

"My mother ended up buying chicken, when the price of her pork ribs jumped to 51 yuan a kilogram the other day, from 30 yuan a few months ago," said Sophie Yu, a Beijing office worker. "The local supermarket saleslady said pork price has been rising every day. But nobody is complaining, and the meat portions in the restaurants have not shrunk."

African swine fever, which is harmless to humans, is deadly for pigs, destroying 32.2 per cent of China's hogs in July, while the number of sows - the benchmark for how many pigs are added to the livestock capacity - tumbled by 31.9 per cent, China's Agriculture and Rural Affairs Vice Minister Yu Kangzhen said last week.

Since a pig's life cycle lasts from 12 to 14 months before it is old enough for slaughter, it takes at least a year before more supply can be brought to market and for prices to stabilise, according to Daiwa Capital Markets' economists.


The Chinese authorities have unveiled a string of measures in the past few weeks to ensure there is sufficient supply to meet the number of public holidays and festivities due in the coming months, from the Mid-Autumn Festival in September to the weeklong national day celebration in early October.

The Chinese government wants domestic supply to make up no less than 95 per cent of the pork consumed every year, a floor for the self-sufficiency ratio, according to an edict on Tuesday. They are encouraging Chinese farmers to raise more hogs, providing more loans and interest subsidies to turn farmland to raise hogs.

To help fill the widening supply gap as the effects of the epidemic continued - after massive culling earlier in the year was followed by dwindling hogs supply - pork import more than doubled year-on-year in July and was up 36 per cent in the year's first seven months.

This is a big deal and has had a price impact for the international pork market, given China - which produces and consumes around half the world's total supply of the meat - was also the largest pork importer in the three years up until 2018.

A hog price index compiled by Rabobank tracking price movements in the European Union, United States, China, Canada, and Brazil has jumped 34 per cent in the six months to mid-August.

China's pork import - including offal - this year is likely to surpass the 3.1 million tonnes record seen in 2016, said Pan Chenju, a Hong Kong-based animal protein senior analyst at the Netherlands-based bank.

"We expect the pork supply gap to not be met by imports or domestic supply of other meat," she said. "The gap will partly be met by plant-based protein and partly by lower consumption."

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A man disinfects a pig farm in Guangan, Sichuan province on August 27, 2019. Photo: Reuters
A 25 per cent loss of pork production in China due to African swine fever could result in around 8 million tonnes of meat supply shortfall this year, Pan said.

The supply takes into account domestic pork, poultry, beef, lamb, and their net import. This is a significant amount compared to around 80 million tonnes of estimated total meat supply for this year.

Pork accounted for 40.3 per cent of China's meat production last year, followed by 36.5 per cent of aquatic products, 8.7 per cent of chicken, 5.1 per cent of duck, 4.8 per cent of beef and 3.5 per cent of lamb, according to a Haitong Securities report.

To make up for the shortfall, China is stepping up the production of substitutes, boosting chicken meat supply by 8 per cent this year, while beef could rise by 2 per cent. Still, that is insufficient to make up for the 10 per cent fall in pork output, according to the forecast by the US Department of Agriculture's latest forecast in April.

With pork wholesale price doubling since the onset of the swine fever outbreak 13 months ago, the prices of beef and mutton have risen by over 12 per cent in the past year as demand for the substitutes increased, Daiwa's economists noted.

Already, beef import volume jumped 83 per cent year-on-year in July and rose 58 per cent for the year's first seven months. Uruguay, Argentina and Australia are China's major beef suppliers, as US shipments are limited by US-China trade tensions.

Beijing at the start of this month slapped an extra 10 per cent tariff on US beef and pork, raising them to 47 per cent and 72 per cent respectively, to retaliate against additional US tariffs on Chinese products.

China has also been importing more mutton in the meantime, with the tonnage of lamb shipments growing 19 per cent in the first seven months, while the value of aquatic products jumped 26.7 per cent in thew same period, Ministry of Agriculture and Rural Affairs data showed.

Although China is the world's largest cultured fish producer, Haitong's analysts said stringent environmental protection compliance requirements had forced the dismantling of a large amount of rearing capacity in lakes and reservoirs between 2014 and 2017.

Costly investment and limited land supply for building new rearing capacity in ponds will continue to restrict the amount of additional meat supply, they noted.

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An employee walks past boxes of imported Tyson Fresh Meats beef sitting stacked on pallets at the Suzhou Huadong Foods cold storage facility in Suzhou, China, on Saturday, July 7, 2018. Photo: Bloomberg
Much of China's incremental seafood supply is coming from imports, where fish fillets - not traditionally favoured by Chinese diners - is increasingly making their way into the dining tables, particularly through group catering, Rabobank's Pan said.

"Packaged meat producers are likely to cut the meat content in their new or existing products, and increase their wheat and plant-based protein content as well as flavouring," Pan said.

The transition for Chinese consumers will not be as big a step as many in the West where rising popularity of plant-based protein as a replacement for meat is a more recent phenomenon, since soybean or other plant-based protein has been part of the Chinese diet for over a thousand years, she added.

Meanwhile, China's chicken meat import grew 39 per cent in July from the same month last year.

But a total ban on the import of US poultry since January 2015 due to highly infectious bird flu outbreak meant the import came mainly from Brazil, Argentina, Thailand and Chile.



Pan said conditions for reopening imports from the US are not only related to disease issue, but also related to the ongoing trade talks.

"However, even if import of US poultry resumes, the volume available to the China market is limited given some cuts China wants are also in high demand in the US," she noted, adding most of the US export to China has historically been chicken feet.

For Chinese farmers, raising poultry output cannot be achieved quickly due to limited availability of breeding herd which takes time to build, especially given most of them are imported.

Also, although chicken farming takes less investment than hogs rearing due to the shorter life cycle of poultry, to achieve a competitive level of productivity and economies of scale that would attract offtake commitments from long term customers, it takes millions of yuan of investment.

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Pigs photographed at the Sheung Shui slaughterhouse in Hong Kong on 19 May 2019. Photo: Winson Wong
Pan does not expect the African swine flu to result in a surge in investment in cattle farming in China in the short term, due to the longer investment-to-harvest cycle. It takes three years from cow to finished cattle, compared to six months for hogs and six weeks for chickens, she said.

This is despite beef price has reached a record high of 70 yuan per kilogram in China last month.

For hogs production, while rising pork prices will encourage some farmers to invest in new capacity, the risk of ongoing African swine fever infections and the cost involved in enhanced disease controls could mean that many restocking will be tentative.

"In the next few years, small hog farms will find it tough to survive, but even large operators will need government help to reorganise the industry so that new large farming compounds will set up in locations far away from any other breeding facility," she said.

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No pork no party ...
Arie tampubolon makan kambing aja nanti