Pork Apocalypse: African Swine Fever and the U.S.-China Trade War



Felix K. Chang | FPRI

In December 2019, China announced that it would waive its high tariffs on American pork for Chinese importers. Beijing portrayed it as a “goodwill gesture” in its long-running trade war against the United States. But, in reality, it was an act of self-preservation. China desperately needs pork—from the United States (the world’s third largest pork producer) and, for that matter, anywhere else in the world. Although Beijing banned pork imports from Canada (the world’s seventh largest producer) in 2018 after Ottawa arrested a Chinese executive from Huawei Technologies, a big Chinese telecommunications equipment firm, China quietly lifted its ban in November.

Not so long ago, China was nearly self-sufficient in pork production. In August 2018, China’s swine herd totaled some 500 million pigs, about half of the world’s supply. That is not surprising since China’s per capita pork consumption ranks among the highest in the world. After all, today’s pigs are tomorrow’s pork dumplings and sweet-and-sour pork. Pork is integral to the Chinese diet, accounting for 60 percent of China’s meat consumption. Hence, the price of pork has an outsized impact on food inflation and the inflationary expectations of consumers. High pork prices have given Chinese consumers cause to grumble. That worries Chinese communist leaders who crave “social stability” and are simultaneously dealing with a slowing economy and popular unrest in Hong Kong.

African Swine Fever
Unfortunately for China, African swine fever has swept across the country, affecting hundreds of millions of pigs. The fever is caused by a highly contagious and deadly virus, for which there is no vaccine. The virus likely spread from Russia, whose farmers had already battled it for over a year. The first reported fever outbreak in China occurred in Liaoning in August 2018. It swiftly spread to Inner Mongolia a month later. By December 2018, it reached Guangdong in southern China. Then by April 2019, it reached Tibet and Xinjiang in western China. Since then, there have been hundreds of fever outbreaks across China.

Once a fever outbreak occurs on a farm, all the pigs on that farm, along with any other pigs within a three-kilometer radius, must be culled and disposed of according to Chinese law. In most cases, farmers are due compensation of 1,200 yuan or about $170 (at 7 yuan to the dollar) for each pig culled to prevent the spread of the virus. But the huge number of fever outbreaks has strained the ability of local governments to pay such compensation. One county official in Liaoning worried that the “local government had poured so much money and resources into preventing and controlling African swine fever that it risked bankrupting the county.” Chinese companies have suffered too. China’s second largest pig breeder saw its losses double during the first six months of 2019.

Pork Chopped
At first, Chinese authorities tried to contain the virus by restricting the transportation of breeder pigs and piglets across county and provincial borders. But doing so has hindered farmers from rearing new pigs to replace those that had been culled. Eventually, China loosened its domestic transportation restrictions. But when the virus spread to Northeast and Southeast Asia, China quickly banned pork imports from Mongolia, Laos, and Vietnam.

Meanwhile, Chinese farmers have tried to improve the cleanliness of their farms to thwart the virus. Farmers have also added nutritional supplements and anti-viral drugs into their pig feed and minimized the movement of pigs within their farms. Nevertheless, in May 2019, the World Organization for Animal Health anticipated that it would take China years to fully contain the virus and expected that as many as 200 million pigs would have to be culled. Other estimates put the number closer to 250 million or half of China’s swine herd by the end of 2019. Indeed, many fever outbreaks have gone unreported. There are been repeated accounts of government officials being slow or reluctant to acknowledge new fever outbreaks, due to the sensitivity of the issue.

Still, Chinese leaders have recognized the seriousness of the situation. Chinese Premier Li Keqiang has urged the government to tackle the issue with “an attitude of urgency.” But in public, Beijing has generally played down the severity of the swine epidemic. In May 2019, it divulged that almost 24 percent of its sow population had succumbed to the fever. That roughly represents 12 million pigs, a small fraction of China’s total number but equivalent to a third of Brazil’s swine herd (the world’s fourth largest pork producer).

Spiraling Cuts
With the loss of so many pigs, Beijing has exhorted its farmers to restock their farms. But most farmers have been cautious. Rearing new pigs in farms already exposed to the virus is risky. The virus can survive outside of a host for weeks and easily re-infect farms that have not been adequately disinfected. Moreover, many farmers are still figuring out how to service the debts on their now-decimated pig herds. Finally, with the loss of so many sows, farmers are holding onto female pigs for breeding rather than sending them to market.

Consequently, China’s pork shortage has spiraled during the second half of 2019. The price of pork has risen sharply. At the start of the swine epidemic, that price was roughly 20 yuan per kilogram. It gradually crept up to 24 yuan in June 2019, but then soared during the following months. By September, it averaged over 38 yuan. And in October, the price spiked to nearly 54 yuan, before settling at 48 yuan per kilogram a month later. To offset the price rise, one Chinese city’s government offered to sell its residents up to one kilogram of pork a day at a discounted price. Other Chinese cities introduced rationing to cap the quantity of pork that consumers could purchase.

With African swine fever far from under control in September, China decided to sell a portion of its “strategic pork reserves”—some 200,000 tons of frozen pork held in storehouses across China—to tamp down the price of pork as well as public discontent. One city announced that it had enough frozen pork to provide each of its residents with 50 grams of pork per day for four days. Meanwhile, the southern province of Guangdong “pledged to release more than 3,100 tons of frozen pork” to its residents.

Bringing Home the Bacon
With its domestic pork supplies increasingly depleted, China has looked abroad. Given its trade dispute with the United States, China initially turned to the European Union (the world’s second largest pork producer) and South America. As a result, China’s monthly pork imports have doubled over 2019. In the longer term, Beijing has sought to encourage the development of new pig farms in places as varied as Brazil and Denmark. But unless those farms can speedily scale, China’s shrinking pig population will continue to pressure its economy and citizens.

Even so, for most of 2019, Beijing kept in place its high tariff on American pork. China may have done so to give the appearance of strength in its trade war against the United States. Hence, American farmers have been unable to capitalize on the surge in Chinese demand for pork for most of the year. But in October China showed a willingness to buy American pork as part of an interim trade deal. Then, in December, China relented—unilaterally offering tariff waivers on American pork. According to a Chinese trade advisor, Beijing’s goal was to “reassure” Washington that China was committed to reducing the U.S. trade deficit with it. That reasoning rings somewhat hollow. More likely, Beijing’s need for American pork to avoid social discontent overrode its desire to stand firm on trade negotiations with the United States. Bringing home the bacon evidently required Beijing to eat a bit of crow.

Games of Chicken
With the price of pork near a record high in China, Chinese consumers have begun to substitute pork with other meats, particularly chicken whose price has also risen sharply. Unfortunately for China, it banned the import of American and European poultry in late 2014 when outbreaks of avian flu threatened those stocks. Indeed, the nearly five-year ban on American poultry, which had once constituted $500 million in U.S. exports, had been seen as a Chinese bargaining chip in trade negotiations with the United States.

But in October, China abruptly dropped its ban on poultry from the France, Spain, Slovakia, and the United States. China’s poultry imports, which have already surged almost 50 percent in the first nine months of 2019, could expand further. The more time that passes before China can contain the swine epidemic that has ravaged its swine herd, the more China will need American agricultural products, especially its pork and poultry. If too much time passes and popular discontent turns into unrest, Beijing may be forced to reconsider its trade-war priorities.


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