The biggest factor affecting hog futures is the ongoing epidemic in China and East Asia. An outbreak of African Swine Fever, a lethal condition for pigs but harmless to humans, has spread like wildfire throughout one of the world’s top pork consumers. China has lost a vast portion of its domestic pork herds and is now relying on foreign pork supplies. Understandably, other nations are equally worried that the disease could spread over into their country’s. Amidst this situation, prices for pork have gone up by 18 percent in the last couple of weeks in China.
Surging to new highs, the ongoing pork price problem is only exacerbated by the ongoing trade war with the U.S., which threatens to see food-prices skyrocket as tariffs on U.S. pork could send Chinese prices soaring even higher. Pork is a mainstay ingredient among the Chinese, whose billion-plus population is especially hurt by the surge in prices. Since August 9th, prices have gone up by 18 percent and have skyrocketed by over 50 percent in 2019.
Africa swine fever has completely decimated China’s pork supplies, with the nation’s domestic pig herd falling by 32 percent. Analysts expect this figure to grow even more in the coming months and years.
“It’s hard to know where prices are going to go. We’re in uncharted territory,” said Darin Friedrichs, a senior Asia commodity analyst with INTL FCStone in Shanghai. “I’ve never seen anything like this,” added Xiao Tong, a Chinese vendor that was quoted in The Wall Street Journal.
As a result of this decline in domestic pork, China has seen its pork imports surge by over 60 percent in the second quarter as the country remains forced to buy from more expensive sources as global supplies remain roughly the same. At the moment, analysts are warning that a full recovery for the nation is still up to five years away.
The biggest concern for U.S. pork producers isn’t so much tariff issues but rather the possibility that the disease will spread to America. Over the past few years, the condition hadn’t really spread into China yet, with outbreaks in Russia and East Asian countries remaining relatively contained. However, in around a year or so, the disease spread like a wildfire in China, highlighting just how quickly it can spread. While there is still the Pacific ocean separating America from China, many industry experts have warned that just one shipping mistake could lead to a similar disaster for America’s pork industry.
Noel White, CEO of Tyson Foods (NYSE: TSN), has previously warned his own shareholders that this upcoming period will pose a major risk to American pork producers. Although exporters in Australia, Europe, the U.S., and Brazil are expected to reap the benefits of reduced Chinese pork supplies, an unexpected outbreak would lead to an immediate shutdown of all domestic pork exports.
At the moment, there is no treatment or vaccine to treat African swine fever and the disease can survive up to a year in the feces, blood, and meat of pigs. As such, it’s almost impossible to contain an outbreak once it starts.
