African Swine Flu
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SOURCE: UN FAO
We should probably all be vegetarians. Or at least that is what the universe is telling us right now. Beef causes global warming. Chicken waste run off ruins rivers and lakes. And now pigs are sick with African swine flu and have to be culled. It’s quite sad. And Vietnam and China are the worst hit.
To give you a sense of how many pigs there are in China and Vietnam, I found these stats from the UN Food and Agricultural Organization (FAO). In 2017, there were 1.4 billion pigs worldwide, of which China accounted for 31% at 441 million and Vietnam 2% at 27 million. That’s a lot of swine. And much more than in other ASEAN countries, even the Philippines. Of course countries like Malaysia and Indonesia, which are majority-Muslim, would have many fewer pigs.
Vietnam recently culled 1.2 million pigs out of the current total of 30 million. According to the same article, pork accounts for 75% of meat consumption. About half (29) of all of its provinces have reported swine flu. And 2.5 milion households are “currently actively engaged in pig farming.”
What I am surprised about is that the government didn’t get ahead of this, like the UN FAO advised back in March. But it difficult, with the virus spreading very easily (it can be carried on clothes or basically anything and stays around for a while).
It seems like it could last quite a long time. From another story:
[Vincent Martin, the FAO representative in China] warned that it could take years before the outbreak was completely contained…"I'm not sure we can say it is under control because we know how complex the disease is," he said. "We have experience in other countries where it took years to get a handle on these diseases."
What is the economic impact? In trying to think this through, there are a few key points to consider:
The immediate culling of pigs will hurt income of these farmers. In China, the government is recommending farmers wait six months before restocking their herds. One of the reasons why it has been hard to control in Vietnam is that the provinces didn’t have enough money to compensate farmers.
Rabobank thinks that pork production in Vietnam will fall 10% and in China drop 25-35%.
Pork prices will continue to rise (they have already).
Other proteins will benefit. This includes chicken, fish, and beef, along with others. At least in China, where the damage is larger, we could see some secular shifts away from pork. If it is to beef, that’s not great for the environment. The stock of Tyson Foods, the large US agricultural company, has already risen.
Countries like Argentina, Brazil, the US and EU are all pork exporters. They should benefit, but how much depends on import restrictions and tariffs.
Feed demand will fall. That includes soybeans, corn, cassava and whey. You could see yogurt companies (which have excess whey) being hurt by lower whey prices.
China’s tough stance on a trade deal with the US may be hard to keep if the swine flu turns into an economic crisis. Currently there is an extremely high tariff (62%) on pork products from the US. I assume that this tariff will fall, as the government faces pressure from consumers who see their food bills increase.
If the flu continues to spread, it will likely reach other parts of the world, like the EU (Eastern Europe already has a problem with it), the US and South America. That would be horrible for the world.
The interconnected world can be a double-edged sword. Trade has been wonderful in lifting people out of poverty worldwide. But it also helps the spread of diseases. On the other side, production elsewhere can help replace some of the lost pork products. So both good and bad.