Bringing Home the Bacon: High Pork Prices Stir Up Tensions in China
October 10, 2019
Pork prices in China have reached record highs as African swine fever has decimated Chinese pig supplies. The high prices have been worsened by the U.S.-China trade war, which has slowed U.S. agricultural exports to China. This case showcases ways in which tariffs and trade tensions can unintentionally exacerbate domestic issues. While tariffs did not directly cause the pork shortage in China, the lack of access to U.S. pork—with the United States being the world’s second largest exporter—has worsened the crisis. China has recently stated that it would reduce tariffs on U.S. pork products, among other goods, as trade negotiations restart.
Q1: Why have pork prices gotten so high?
A1: The price of pork has been rising for months in China due to a shortage of pigs. Prices recently soared to 46.7 percent above the year-on-year August price amid an outbreak of African swine fever, which has killed off as many as half of China’s pig population. The disease is lethal for pigs but harmless to humans. There is currently no cure available. China previously produced most of the pork it consumed but no longer can. Some estimates suggest that pork production in Guangxi province, a major supplier in China, could fall as much as 90 percent this year. China is estimated to have a pork shortfall of up to 10-18 million metric tons. Chinese pork production is expected to continue to fall over the next year, as experts suggest that the extent of the outbreak is underreported. Overall food costs have also risen 10 percent in the past year. Prices of beef, mutton, and chicken grew between 11 and 12 percent.
The outbreak has also discouraged pork farmers from continuing to raise pigs as uncertainty over the viability of herds lingers. Additionally, given the loss of many sow hogs and continued contamination risk, rebuilding the pig stock could take several years. The epidemic has also spread to other Asian countries, including Vietnam, Cambodia, Mongolia, North Korea, and Laos. The Chinese government recently began reaching into its strategic pork reserves to combat high prices and has paid out more than 2 billion renminbi in subsidies to pig farmers since April. However, experts fear that the measures will not be enough to prevent shortages and high prices. Some analysts estimate that pork prices could double over their 2018 level by the end of the year.
Q2: Why is pork so important in China?
A2: The Chinese like pork. China is the number one pork- producing country, and pork is its most popular meat, accounting for more than 60 percent of Chinese meat consumption. It produced more than double the amount of pork than the European Union and more than four times the amount of the United States in 2017. China also ranks among the highest in pork consumption per capita, with citizens consuming approximately 88 pounds each per year. Last year, China consumed nearly half of the world’s total pork supply. Despite producing nearly 95 percent of the pork it consumed in 2018, China was still the third-largest pork importer, bringing in $2.1 billion worth of pork.
Pork also holds deep cultural significance in China, which helps fuel its popularity. Most Chinese families cook with pork every day, especially those living in the central and northern regions. Pork serves as the stuffing for dumplings; it’s served in noodles or soups, or on its own. Pork is not only a staple in diet but also used by many citizens to gauge their economic well-being and is considered a symbol of wealth. The meat holds particular importance this fall because of the September Mid-Autumn festival, during which families come together and cook traditional meals, involving lots of pork. Celebrations of the 70th anniversary of the Chinese Communist Party rule on October 1 also contributed to increased demand. The celebration involved a military parade and a week-long national holiday for workers, during which many travel to be with family leading to increased pork consumption.
Q3: How have Chinese officials and citizens reacted to the price increase?
A3: Many Chinese government officials have grown increasingly alarmed at the extent of the pork crisis, calling the issue a “national priority.” In addition to the use of frozen pork reserves and subsidies, local governments have attempted to stabilize the issue through other methods. In Nanning, officials capped pork prices and provided ration tickets. However, this prompted comparisons to the Mao era, and the method was quickly dropped. The Life Times, a Communist Party publication, also recently published an article entitled “It Is Better to Eat Less Pork,” which aimed to persuade readers that eating less pork is better for one’s health. Chinese citizens have taken to social media to lament the high pork prices. Citizens complain through both humorous videos and in earnest about the inability to afford pork. Given the cultural significance of pork, the shortage holds a special ability to sow (no pun intended) discontent, unlike many other commodities.
Q4: How has trade impacted the shortage?
A4: China has typically been mostly self-sufficient in pork production, so the newfound shortage has forced it to look increasingly to foreign supply to fill demand. In attempting to fill some of its expected 10-18 million metric ton pork shortage, China has turned to Denmark, Spain, Brazil, and other countries for additional pork exports. The Chinese government has already approved 25 new Brazilian meat factories for export and participated in talks with Danish officials about expanding exports. China had also initially looked to Canada for pork. Canada sent 217,193 metric tons to China in the first six months of 2019, an increase of 50 percent from last year. However, in June, China stopped accepting meat from several Canadian producers after a shipment was discovered to contain ractopamine, an additive banned in China.
The United States has traditionally exported a moderate amount of pork to China. In 2016, the United States exported 544,943 metric tons to China and Hong Kong, which accounted for almost a quarter of total U.S. pork exports. This measure fell to 351,774 metric tons in 2018, amid rising trade tensions. During the height of the trade war, Chinese tariffs on U.S. pork reached peaks of 62 percent, up from 12 percent last year. However, the upcoming return to negotiations, and this month’s delay of tariff rate increases by the United States, has resulted in China announcing they would lift some tariffs on pork, along with other goods. The exact extent of the exemption is unclear, but U.S. pork exports to China will likely rise as a result. Reports suggest that Chinese companies are preparing to purchase around 100,000 metric tons of U.S. pork. Principals from the U.S. and China will return to negotiations around October 10.
U.S. pork farmers are optimistic that they can take advantage of China’s pork crisis despite uncertainty in trade relations. In the first five months of 2019, U.S. pork exports to China were 7 percent lower than in 2018, but relaxed tariffs could allow for U.S. companies to jumpstart exports at elevated prices. In order to service the Chinese market, many U.S. pork producers will have to stop using the commonly added growth drug ractopamine, which is banned in China.
Despite increasing imported pork and released frozen reserves, China will likely continue to struggle with high pork prices. The U.S. Department of Agriculture estimated that total worldwide pork exports for the first 10 months of 2019 would only be 8.8 million metric tons. Even if China was to import all the tradeable pork in the world and use up all its frozen reserves, there would still be a supply deficit of around 6 million metric tons.
Jack Caporal is an associate fellow with the Scholl Chair in International Business at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Lydia Murray is an intern with the CSIS Scholl Chair in International Business.
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