African swine fever is sweeping through China quickly. On 6 September 2018, three new cases were reported in Anhui Province and one new case in Jiamusi City, Heilongjiang Province. Despite being a newly infected area, this is not the first time Jiamusi City has reported cases of ASF. In China’s second confirmed case, 16 August 2018, infected live pigs were transported from Jiamusi City, Heilongjiang Province to Zhengzhou City, Henan Province by Shuanghui Zhengzhou Slaughterhouse. However, according to the testing result from Heilongjiang Government on 17 August, there was no ASF virus detected in Jiamusi City at that time.

Over the past 6 weeks (3 August to 10 September), 15 ASF cases have been confirmed in China, covering six provinces in sequence: Liaoning, Henan, Jiangsu, Zhejiang, Anhui and Heilongjiang. In total, 897 pigs died, 2,785 pigs were infected and nearly 40,000 pigs were slaughtered in the infected areas.

Among these six provinces, Liaoning and Heilongjiang in the Northeast and Henan in Central China, are primary pork producing regions. Pigs from these regions are regularly transported to other provinces – Anhui in East China contributed 4.1 percent of China’s total pork production in 2017, some of which were also exported to neighbouring provinces. Jiangsu and Zhejiang, also located in East China, purchase many pigs from other provinces to support their provincial pork consumption demand. In all, the amount of live pigs sold by these six provinces reached 174,175,000, occupying 25.3 percent of the nationally sold live pigs in 2017.

To cope with such a fast-moving disease, China’s Ministry of Agriculture and Rural Affairs released the “Notice on Strengthening Domestic Distribution and Supervision of Live Pigs and Products (Notice)” on 31 August, prohibiting the transportation of live pigs from high-risk areas to low-risk areas. The notice also stipulates that for those provinces or cities with two or more ASF cases reported, their live pigs and products shall not be distributed to other provinces or cities. That means the live pigs and products in Jiangsu Province and Anhui Province are banned from being transported to other provinces. In addition, the live pig markets in infected areas are requested to close, and the trans-provincial transportation of live pigs shall not pass through the infected provinces.

Contrary to the negative influence of bird flu on chicken prices, the domestic average live pig price has increased by 6.6 percent to CNY14.1 per kg (12 September) since its first outbreak of ASF on 3 August. However, the price situation varies by province. Taking Liaoning as an example, this province reported the first case of ASF in China and its live pig price has dropped by 5.5 percent to CNY11.9 per kg in the past six weeks. In marked contrast to Liaoning, the live pig price in Zhejiang has increased by 28.2 percent to CNY18.0 per kg in the same period.

The significant price gap among China’s different provinces can be attributed to the varied supply and demand situation in their local pork markets. For instance, one direct reason for the soaring live pig price in Zhejiang Province since the beginning of this August is the banned transport of its major live pig sourcing province: Anhui Province. Another major reason is the Environmental Protection Law, implemented on 1 January 2015. The live pig stock in Zhejiang Province was reduced to 5,303,500 pigs by the end of June 2015, a large decline rate of 45 percent compared with the stock at the end of 2014. A total of 4,665,300 live pigs were produced in the first half of 2018 in Zhejiang, only occupying 1.4 percent in the domestic live pig market. Consequently, as a major pork consumption province, Zhejiang has to purchase live pigs from other provinces. After the ASF disease broke out, the banned transport of live pigs from other provinces directly caused a short supply of local pork followed by a soaring live pig price.

As a consequence of the environmental law, many small and medium-sized pig farms below-standard were closed or demolished forcibly, as mentioned in my previous article, “The pollution regulations affecting China's pork producers”. China’s large pig-breeding enterprises are moving Northwards and East for pork production. Once pigs achieve desired age and weight, they would be transported from the North to the South to support local pork consumption demand. Due to the spread of ASF, the trans-provincial transportation is banned, resulting in the unbalanced pork supply-demand situation.

Major stakeholders in the import market are more optimistic towards the future market, especially after the imported price of some specific pork articles rose by 10 percent or more since August 2018. This hopeful perspective is mainly based on the reduced pork supply in the future.

Influenced by ASF, many small- and medium-sized pig farms have accelerated the de-stocking of live pigs and have suspended re-stocking with piglets to avoid wasted expense should ASF reach their herd and a mandatory cull be imposed. The subsidy of CNY800 for each slaughtered pig is not enough to allow producers to continue as normal. Such a trend is spreading not only in the infected provinces, but also in currently uninfected areas.

It is worth noting, however, that the domestic pork consumption demand could be dampened as ASF moves through China. China’s Ministry of Agriculture has stated that it is impossible for humans to be infected by ASF, but local consumers may stop buying pork and turn to other alternative meats until ASF is eradicated. Therefore, the stability of the Chinese market and live pig price trend will heavily rely on rebalancing domestic pork supply and demand.

By Angela Zhang

For more data and insights, register at IQC Insights here or contact the author