Market Impacts of African Swine Fever Outbreak
China, as the world's largest pork producer and consumer, faced significant disruptions in its domestic pork market due to the African Swine Fever outbreak. This study examines the implications on supply, prices, consumer demand, government responses, and the threat posed to the US hog industry. Insights into China's import reliance and impact on global trade are also highlighted. The outbreak's effects on China's pork stocks and market prices are analyzed, shedding light on the complexities of addressing and managing such a crisis.
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Presentation Transcript
Market Impacts of the African Swine Fever Outbreak in China H. Holly Wang Department of Agricultural Economics, Purdue University Farm Policy Study Group December 10, 2019, West Lafayette, IN
Outline China and the world s pork markets ASF impact on China s domestic market Supply Prices Consumer demand Market response to government s actions China s import and impact on other countries Threat on the US hog industry
China and the World Pork Market China is the world s largest pork producer and consumer, accounting for ~50% (USDA FAS). 2018 inventory (production would double) China: 440M EU: 150M US: 73M Brazil: 39M Russia: 23M
Chinese Pork Import China is a net pork importer. It imports <3% of its consumption, but accounts for >10% of the world trade SP, GR,CA, US, DM, NE, BR, FR The ASF loss is huge relative to global trade Import sources April-Nov, 2018
ASF Impact on China Domestic Supply ASF eliminated ~ of Chinese hog and breeding sow stocks The trend got flat in the last month Reasons for the fast spread: Small scale hog farms, vulnerable biosecurity measurement Farmers lack of trust to the government payment, selling infected herd Local government wants to increase supply and reduce financial burden, covering up Pig and Sow Stock in China (Jan 2018 - Sep 2019) 36000 3600 34000 3400 32000 3200 30000 3000 Hog (10,000 heads) 28000 2800 26000 2600 24000 2400 22000 2200 20000 2000 18000 1800 pig_stk (10,000 heads) sow_stk(10,000 heads)
ASF Impact on China Domestic Market Pork price was more than doubled in 2019 Lowest in the spring of 2018, and peaked in October 2019 Dropped slightly in the last month A sign of rebounce at the year end 50 Pork price (simple provincial average, Yuan/Kg) 45 Hog price (simple provincial average, Yuan/kg) 40 40 35 35 30 30 25 25 20 20 15 15 10 10 201928 201801 201806 201811 201816 201821 201826 201831 201836 201841 201846 201851 201903 201908 201913 201918 201923 201933 201938 201943 201948 5 201846 Week 201801 201806 201811 201816 201821 201826 201831 201836 201841 201851 201903 201908 201913 201918 201923 201928 201933 201938 201944 201949 Week
Market Analysis Supply driven market price response Liquidation first, causing price to drop Inventory drop started in late 2018, causing sharp price rise in the summer of 2019, a lag of seven months, roughly the hog growing cycle Supply reacts to market price, secondary effect Slaughter hog size dropped first, risk averse decision; then size increase later, profit driven decision Late fall of 2019, super high price induces cautious restocking Demand response Pork has been staple meat in China Inelastic, -0.5 Data 80-03 Data 80-19 Substitutive Poultry, fish, beef Demand reduced 2018 Per Capita Consumption (KG) 50 39.45 46.09 Per Capita Consumption 40 30 8.99 14.49 20 10 Pork Beef&Mutton Poultry Fish&Sellfish 0 1980 1983 1986 1989 1992 1995 1998 2001 2004 Poultry Fish&Sellfish 2007 2010 2013 2016 Pork Beef&Mutton
Market Response to Government Actions Supply side Release pork reserve: little effect Small quantity Frozen pork, two separate prices Subsidize investment and relax environmental regulations in production: slow response Limited breeding stock to supply piglets ASF not under control, high risk Breeding sow stock rose slightly, hog stock decline slowed down Demand side Monitor and crack down speculative behaviors Ration in some cities
Chinas Pork Import and Impact on Other Countries China has increased it pork import A global shortfall in meat supply, and rise in price The primary importing source is EU, including newer countries like Italy. Other sources are like AG Surrounding countries also got infected, VN, MG, KR, PH, LA, and see price surge
What if ASF hit the U.S.? As the world s 2nd largest hog producing country, the impact of ASF outbreak is serious (Lusk analysis): A 10% production reduction will bring a price increase 2%-7%, and $1B loss to U.S. producers and consumers each, giving all else the same Producer loss will rise to $3.6B while consumer gain $1.2B, if our overseas market countries ban our exports because domestic price will drop by 2%-8% If the ASF can reduce production by 50%, the producer and consumer losses will be $5B each, or $7 and $3 respectively, depending on export reactions Biosecurity in the U.S. Rely on modern technology with strict measurement Government provides incentives to farmers to help curb the spread
