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China’s Missing Pigs Reveal Trouble Tracking Animals Raised on Family Farms

Jason Gale
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China’s Missing Pigs Reveal Trouble Tracking Animals Raised on Family Farms

(Bloomberg) -- A year after China’s pigs began dying en masse in the world’s most devastating animal disease outbreak, analysts are yet to get a clear handle on exactly how many hogs have been eliminated.

China, the world’s biggest pork-producing and consuming nation, has reported that about 1.2 million pigs have been culled in an effort to contain African swine fever. Yet pig inventories plunged 39% in August from a year earlier, when the virus was first detected in the country. That equates to a loss of 167 million animals, based on the 428 million head the U.S. Department of Agriculture estimates China had at the end of 2018.

“This is a huge number, and it likely reflects the halting of husbandry practices, more than elimination of all pigs where the virus has been detected, and even less those that have succumbed because of the disease itself,” said Juan Lubroth, chief veterinary officer with the Rome-based Food and Agriculture Organization of the United Nations, in an email.

China’s swine herd has halved to 200 million head while pork output has been slashed by an “unprecedented” 25%, or 13 million metric tons, since August last year, Rabobank said Friday. The country produced 704 million hogs, or 55% of the global total, in 2017, according to the USDA, which predicts the number of hogs produced will fall to a 20-year low of 507 million in 2020.

“The African swine fever that we all have seen now so rapidly grow in China really was a shock to all of us,” said Jack C. Bendheim, chairman and chief executive officer of Teaneck, New Jersey-based Phibro Animal Health Corp.

Missing Pigs

“The amount of pigs that are missing in China are greater than the rest of the world’s production totally,” Bendheim told last month’s Morgan Stanley Global Healthcare Conference. “So the impact is huge, obviously, and the impact in China is catastrophic.”

China is likely to register a 10-million-ton pork deficit this year, more than the roughly 8 million tons in annual global trade, according to Vice Premier Hu Chunhua. That means the country will need to fill the gap by itself, he said.

“Depending on what you believe as to what the government is saying, the challenge is anywhere between 30% of their herd and 70% of their herd,” Kristin Peck, executive vice president and group president of Zoetis Inc., the world’s largest animal health-care company, told last month’s Morgan Stanley conference. “If you believe that it was the 30%, just to give you a context, that’s more than the U.S. produces in pork in a year that they have already lost.”

Quantifying the impact is important because pork is a staple source of protein in China, and the reduction in supplies is pushing meat prices to a record and stoking inflation. Pork prices may rise further this year, with meat prices typically peaking in the fourth quarter, said Pan Chenjun, Rabobank’s Hong Kong-based senior animal proteins analyst, in an interview Friday.

Officials in Beijing have recently become more vocal about the need to raise pork production over fears soaring prices will tarnish the Oct. 1 celebrations for the country’s 70th anniversary of Communist rule in China.

‘Pork Is Big’

“Pork is big in China -- no other way to describe it,” said Karim Bitar, chief executive officer of Genus Plc, one of the world’s largest livestock genetics companies. African swine fever may shrink pork supplies further, “maybe to the tune of approximately 40%,” Bitar said on a Sept. 5 conference call.

It’s impossible to accurately calculate the shortfall because China lacks a system to reliably track swine numbers and pork output. Half of China’s swine are bred on “hundreds of thousands of small family farms,” the USDA said in July, and half of its pork is produced by private slaughterhouses.

Slaughter data reported through official channels, however, “indicate that the magnitude of the decline in the herd is quite substantial,” said Tim Ryan, a Singapore-based market analyst with trade group Meat & Livestock Australia, in a phone interview.

“Whether it’s 25% or 30%, they’re still massive numbers,” Ryan said. “It’s important in terms of feeding the population how big the shortfall is, but in terms of implications for global trade, the global trade can’t fill a 20% hole let alone a 40% hole.”

While soaring prices have encouraged some hog-raising businesses to invest in expanding production, other farms “have taken pretty big hits and are scarred,” said Stephen Wilson, group finance director at Hampshire, England-based Genus.

‘Tremendous Wipe Out’

“And then you have the whole backyard sector, where there’s been a tremendous wipe out of the pig population, and it’s unclear exactly how quickly they’re going to step back into it,” Wilson said on the Sept. 5 conference call.

It may take China five years or more to replenish its hog farms to pre-African swine fever levels, Rabobank’s Pan said. Still, pork production may never fully recover because of shifting consumer preferences among urban Chinese toward other meat products, she said.

Meanwhile, African swine fever will probably continue to spread in Southeast Asia, Wilson said.

The infectious virus isn’t known to infect people. It was reported in Timor-Leste, a nation of about 1.2 million people that sits within the Indonesian archipelago, on Friday, and was also reported to have struck the Philippines and South Korea last month. It’s been spreading in Europe, and then Asia, since arriving in the former Soviet republic of Georgia in 2007.

“It’s going to remain a challenge for many of these countries to contain it and manage it,” Wilson said.

--With assistance from Anna Kitanaka and Niu Shuping.

To contact the reporter on this story: Jason Gale in Melbourne at j.gale@bloomberg.net

To contact the editors responsible for this story: Anna Kitanaka at akitanaka@bloomberg.net, James Poole

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