A couple months ago Chinese tariffs on U.S. pork went to 62%, up from 12% at the beginning of the year. Should the swine fever spread and China's national pork reserve be depleted the tariffs will probably be a discussion item at the next trade talks.
As things stand at the moment the folks hit hardest by this confluence of events are Chinese consumers, as local pork prices rise, U.S. producers who are seeing their biggest export market shrink dramatically and China's WH Group who bought the largest U.S. producer, Smithfield, strategically brilliant but short term painful.
Here's the latest from the journal Science, Sept. 10:
SHANGHAI, CHINA—African swine fever (ASF), a deadly virus in pigs and wild boar, continues to spread in China and will almost certainly wreak havoc in other countries in Asia soon. That's the somber conclusion from a meeting of animal health experts organized by the United Nations's Food and Agriculture Organization (FAO) in Bangkok late last week. "It's no longer ‘if’ [spread beyond China] will happen but when, and what we can do collaboratively to prevent and minimize the damage,” FAO Chief Veterinary Officer Juan Lubroth said in a statement issued on Friday, at the end of the 3-day meeting. Veterinary authorities from 12 countries agreed to form a new network to share information and work jointly to control the spread of the disease.For years we've marveled at what The Economist once called 'The Empire of the Pig' and were able to forecast the purchase of the largest US pork processor, Smithfield, as a result of all that marveling.
The virus that causes ASF doesn't infect humans, but the most virulent strains are nearly universally fatal for pigs. There is no vaccine and no cure, so controlling the spread of the disease requires destroying all animals on infected farms. The appearance of the virus in China in August—and its inevitable spread—threatens devastating economic losses for farmers and shortages of a vital source of protein for citizens of developing countries, particularly in East and Southeast Asia.
China's agriculture ministry reported a new outbreak while the Bangkok meeting was in progress; the virus has now been found at 18 farms or slaughterhouses in six provinces, according to FAO. The outbreak sites are widely dispersed, indicating that shipments of pork products are spreading the disease; live animals aren't usually shipped over such long distances.
The virus is on the move in Eurasia and Eastern Europe as well. Bulgaria reported its first outbreak to the World Organisation for Animal Health in Paris on 31 August; the virus has also been found in Georgia, Russia, Poland, the Czech Republic, Romania, and Moldova....MORE
Then last year we started seeing stories similar to this at Fortune, June 20: "Increasingly Affluent Chinese Want Healthier Food and that Has Big Implications for Meat Producers".
Here's the ten second tutorial on Ag cycles, first posted in 2008:
The Hog Cycle
No not Harley-Davidson, although I imagine some econ grad student has written the paper.
Wheat and hogs are two commodities with long price series. We mentioned the hog cycle back in January:
The hog price series is one of the longest we have records for, back to the 1200's. The cycle is:And some of the the more recent stuff, March 3:
slaughter begets scarcity begets higher prices begets breeding begets over-supply begets slaughter. It's been going on for a while....
"China Unveils How It Will Retaliate To US Tariffs, USDJPY Snaps"
If I was a pig in the Midwest I'd be tempted to vote for Donald Trump in 2020.Pork prices, with the exception of 2014 have been trading between $60 and $100 for a decade.In 2014 you had the American bacon binge (2011 - 2014) combined with porcine epidemic diarrhea virus (PED).
And I'm not talking deplorables.
As my favorite translator of Mandarin tells me, Chinese people love pork. And we've been babbling on about China's Strategic Pork Reserve for over a decade. Here's 2010's '"...Pork Signals Record Meat Prices' and China's Strategic Pork Reserve (SFD)":
I just threw Smithfield's symbol into the headline, neither story directly mention's the country's largest hog and pork producer. We first mentioned the Strategic Pork Reserve in an October 2007 post "Is China Going to Own the World?".As it turned out, Smithfield was purchased by China's largest protein processor, Shuanghui International Holdings (now WH Group), in 2013 in a move that triggered a national security review in the U.S., I kid you not,
Anyhoo, China has been playing power politics for something like 5000 years and should President Trump go through with the threatened tariffs the Chinese will strike directly at his base while the porkers breathe a little easier as a major export market is taken off the table, so to speak....
When it was realized PED was not as deadly as rumored/feared (but still quite messy) prices came back down.
