African Swine Flu's Impact on China's Pork Market

Introduction

The change in a market has its deeper impact on social phenomena as well as economic growth of a country. It had been encountered with an African Swine flu that had a huge outbreak in China, fever of pigs, which was not harmful to humans but deadly to pigs. The outbreak led to the death of over a hundred millions of pigs in the country since the outbreak in August 2018. It continued till July 2019, then the pace slowed but affected the Chinese market on a long-term basis leading to the shortage of the country's most popular meat leading to the increase of prices of pork across the country as well as the global market.

Discussion

The African swine flu spread across every part in China and also to the neighbouring countries. According to Pitts and Whitnall (2019, p.52), the pig herd recorded in China in June 2019 showed 26 per cent declination on the annual statistics. As China has been accountable for 50 per cent if the global pig herds and 50 per cent if the meat consumption the global market was affected.

Relevant Market details

The African swine flu has a severe effect on the Chinese market and the economy with the increase in the price in the domestic market. According to Carriquiry et al. (2019, pg. 4), pig production in China decreased by 6 per cent during the first half of 2019, which led to increasing the imports of pig in China from other countries, especially the USA. The demand increased more in the latter half of 2019 and the beginning of 2020. The increase of the pig is related to the amplification of price in the global market too.

China's pork exports dropped since the outbreak, in the beginning, in August 2018, the drop was 29 per cent. In 2019, the exports of pork from China dropped by 42 million tonnes which contributes to a 60 per cent drop for sixteen years. Along with the coronavirus outbreak, the business shut down, further lowering the rate of exports. In the first quarter of 2020, the export was lowered by 10.38 million tonnes whereas in the second quarter it lowered by 10.47 million tonnes right is expected to be the highest if a 31 per cent drop in the export.

Products and competition

According to Borror (2019, pg. 1), due to the outbreak of the African swine flu, the customers in China had to look for an alternative as a protein source. This is expected to increase the consumption of poultry and fish, at a higher rate owing to its availability and affordability. There is increased demand for beef and sheep-meat but less due to relatively higher costs. Along with the Chinese market, the demands are expected to increase globally, thus leading to an increase in meat prices in the Chinese domestic market.

According to Li and Chavas (2020, p. 17), the Chinese market could not have sufficient pork production during the normal conditions and accounted for half of the global exports, the flu affected the production and is widely hitting the farms along with a drastic effect to the economy as would bring in revenues in the form of tariffs. The flu crisis in China has provided opportunities to the western counties to grab the market.

Analysis of the Situation

The African swine fever outbreak destroyed the pork stick in China, leading to an increase in overall meat prices and contributing to high inflation in the country.

How changes have influenced the price

According to Lili (2020, pg. 1032), the flu outbreak in China has been deprecating pork production in the country, contributing to infatuation in the economy. The government has shown the changes in the price, which has nearly doubled in the month of the outbreak, August 2018, directing an increase in overall food items by nearly 18 % during the period. The shortage of pork meat has impacted the lunar new year celebrations in the county and has made it expensive. China is the largest producer, consumer along with increased demand for pigs has led to an increase in the price globally.

According to Donier and Bouchaud, (2016, p. 123406), the price index shows a rise of inflation by 4.5 per cent on an annual basis in December 2029, which has been the highest since November 2012 and has been rising since. The restaurant has to spend an extra of about 1500 USD dollar annually due to the increased prices of pork.

Demand supply management

According to Ding and Wang (2020, pg. 44), demand and supply theory refers to the relation between seer of a product and consumer if the product. The concept explains the association of the availability of a product and its demand or price customers are ready to pay in the market. The relation is generally viewed as a low supply with high demand and high supply with low demands.

According to Shao et al (2018, pg. 1), every individual in China consumes about 30 kg of pork annually whereas an individual in the USA consumes 26kg. The outbreak led to the loss of 40 percent of the per cent of China and the producer prices increased by 125 percent. As pork being the most popular meat in the nation, imports are increased in order to fulfil the country's demand for pork and other meat products. According to Dixon et al. (2020, p. 221), the trade flow has increased in the range of 20 to 30 % in beefier chicken imports from 2019 to 2020 whereas the pork imports have increased by 54 percent per centre.

On the other hand, to tackle the issue, China has been assuring better production of pigs, by taking the necessary measures and helping the small farms to be rebuilt as most of the china's production flows in from small farms.

Conclusion

Based on this change analysis above, it can be acknowledged that African Swipe Flu impacted the economy severely, along with inflation in the economy. In order to overcome inflation, China needs to work on the root cause of the problem and work on it. The county should find ways to treat the deadly disease and to prevent it. As the production will increase, the demand-supply gap will be managed along with the decrease in prices of pigs thus leading to a decrease in the inflation rate.

References

• Borror, E., 2019. Growth of the Meat Trade (No. 2319-2019-4930). https://ageconsearch.umn.edu/record/296822/files/USDA_Erin_Borror1.pdf
• Carriquiry, M., Elobeid, A., Hayes, D.J. and Zhang, W., 2019. Impact of African Swine Fever on US and World Commodity Markets. Agricultural Policy Review, 2019(3), p.4.https://lib.dr.iastate.edu/cgi/viewcontent.cgi?article=1094&context=agpolicyreview
• Dixon, L.K., Stahl, K., Jori, F., Vial, L. and Pfeiffer, D.U., 2020. African swine fever epidemiology and control. Annual Review of Animal Biosciences, 8, pp.221-246.https://www.annualreviews.org/doi/pdf/10.1146/annurev-animal-021419-083741
• Donier, J. and Bouchaud, J.P., 2016. From Walras’ auctioneer to continuous time double auctions: A general dynamic theory of supply and demand. Journal of Statistical Mechanics: Theory and Experiment, 2016(12), p.123406. https://arxiv.org/pdf/1506.03758
• Ding, Y. and Wang, Y., 2020. Big government: The fight against the African Swine Fever in China. Journal of Biosafety and Biosecurity, 2(1), pp.44-49. https://www.sciencedirect.com/science/article/pii/S2588933820300066
• Li, J. and Chavas, J.P., 2020. The Impacts of African swine fever on Vertical and Spatial Hog Pricing and Market Integration in China. (pp.10-20)
• https://ageconsearch.umn.edu/record/304516/files/18994.pdf
• Lili, X., 2020, August. The Analysis of the Reasons for China’s Rising Pork Prices in 2019. In 2020 4th International Seminar on Education, Management and Social Sciences (ISEMSS 2020) (pp. 1032-1035). Atlantis Press.
• https://download.atlantis-press.com/article/125944092.pdf
• Pitts, N. and Whitnall, T., 2019. Impact of African swine fever on global markets. Agricultural Commodities, 9(3), p.52.https://www.agriculture.gov.au/sites/default/files/sitecollectiondocuments/abares/agriculture-commodities/AgCommodities201909_AfricanSwineFever_v1.0.0.pdf
• Shao, Y., Li, M., Zhang, W., Ji, Y. and Hayes, D.J., 2018. World’s Largest Pork Producer in Crisis: China’s African Swine Fever Outbreak. Agricultural Policy Review, 2018(3), p.1. https://lib.dr.iastate.edu/cgi/viewcontent.cgi?article=1082&context=agpolicyreview