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Why African swine fever might create a boom in poultry production

This year might well go down as a landmark year in the global poultry and pig industries, for all the wrong reasons.

24 July 2019, at 9:30am

People in the industry are concerned, rightly or wrongly, that some farmers – and even countries – are under-reporting the extent of African swine fever (ASF) so they can keep trading despite the risks of its further spread. Nevertheless, a report published by The Economist in May estimated that over the course of 2019 Chinese pork production would fall by 20 to 50 percent. This will have a massive impact considering that half of all the pork in the world is produced and eaten in China.

The spread of the disease has been associated with small family farms, which adhere to lower biosecurity standards than larger commercial operations.

Meanwhile, in Europe, Denmark, another large pig-growing country, is building a 47 km fence to keep out wild boars, which are thought to be a disease vector for ASF.

The knock-on effects of the disease are likely to be huge. No vaccine has yet been developed so it is not clear how long the time it will take to contain the crisis. A drop in the supply levels of pork of on a scale similar to those suggested in The Economist piece would have massive effects on the whole market.

Declining supply disrupts the global industry

The spot price of pork is rising from China to New York. In a normal economic system, the price rise should cause an increase in supply as new investments are made in the industry in unaffected areas. In this case, however, investors are reluctant to take a position in the pork industry as they fear the disease might spread to new farms, areas and countries.

The fall in the pork supply and the consequent rise in price will have a spillover effect, which will be translated into higher demand for chicken and other poultry meat.

An economic analysis in Europe showed a positive cross-elasticity of demand for chicken as compared to pork of 0.62. This means that 60 percent of consumers value chicken and pork equally.

All this indicates that on a world level there will be a big increase in demand for poultry meat (on top of the year-by-year increase the sector is experiencing anyway). If this is the case, investment in the poultry industry would be the logical response to the African swine fever epidemic.

It seems likely, then, that about 60 percent of the fall in the global pork supply will be met by an increased demand for poultry. So as long as African swine fever remains an ongoing issue and unsolved, it seems more sensible to invest in new chicken farms than in pig farms. At the same time, the new pig farms that will be built will need to be of the best design and quality – with a big emphasis on biosecurity.