Plagues of China

China Responds Slowly, and a Pig Disease Becomes a Lethal Epidemic

The bungled effort to contain Chinese swine fever could result in higher food costs for years and shows the limits of Beijing’s top-down approach to problems.
By Keith Bradsher and Ailin Tang

Buyers and sellers at a pork wholesale market in Beijing.

WULONGQIAO, China — A devastating disease spreading from China has wiped out roughly one-quarter of the world’s pigs, reshaping farming and hitting the diets and pocketbooks of consumers around the globe.
China’s unsuccessful efforts to stop the disease may have hastened the spread — creating problems that could bedevil Beijing and global agriculture for years to come.
To halt Chinese swine fever, the authorities must persuade farmers to kill infected pigs and dispose of them properly. 

But in China, officials have been frugal to the point of stingy, requiring farmers to jump through hoops to seek compensation from often cash-poor local governments.As a result, Chinese officials are not reaching farmers like Peng Weita. 

When one of his pigs suddenly died three months ago from swine fever, he said, he quickly slaughtered his other four dozen before they could fall sick as well. 

But he buried them and took a big loss rather than reporting the deaths to the government for compensation.
“Three years of costs were all for nothing,” Mr. Peng said.
His loss was the government’s as well. 

Because he did not report the episode, local officials could not make sure he followed all the steps necessary to halt the spread, like burying carcasses a considerable distance from the farm. 

Mr. Peng said he probably buried them too close to his farm but declined to discuss details of the disposal.
The epidemic shows the limits of China’s emphasis on government-driven, top-down solutions to major problems, sometimes at the expense of the practical. 

It has also laid bare the struggle of a country of 1.4 billion people to feed itself.
China has long viewed food security as tantamount to national security. 

It had become essentially self-reliant in pork as well as in rice and wheat thanks to subsidies and aggressive farmland management. 

The swine fever epidemic will test that commitment to its increasingly affluent people, who more often expect meat at the dinner table.
The pig disease — which is not fatal to humans but can be spread by us — has now extended swiftly out of China. 

It has moved across nine other Asian countries, particularly Vietnam, which is the world’s fifth-largest pork producer and has lost much of its herd this autumn. 

Before reaching China, the disease had been slowly infecting occasional farms in Russia and elsewhere in Eastern Europe.
Powered by pork, China’s overall food prices last month were one-fifth higher than they were a year ago, after seven years of little change. 

Large purchases of pork by China are driving up live hog prices in the United States, Europe and around the globe, pushing up costs for everything from German sausages to Vietnamese pork meatballs.
Beef and lamb prices have risen as families worldwide seek alternatives, so much so that overall meat prices in international commodity markets have increased nearly 20 percent in the past year. 

Brazil is now ramping up beef and chicken production to meet demand, partly by burning forests in the Amazon to clear land for agriculture.
Workers unloading pork carcasses from trucks at a warehouse that is part of a network of China’s national pork reserve, in the outskirts of Beijing.

“The epidemic could have broad and deep economic impacts at the global level,” said Boubaker Ben Belhassen, the director of trade and markets at the United Nations’ Food and Agriculture Organization in Rome. 

“There’s enough pork in the world to offset China’s shortfall.”

China used to have 440 million pigs — almost half the world’s population — but its herd has shrunk by half or more, according to Rabobank, a Dutch bank with a heavy agricultural focus. 

Pork prices in China have more than doubled.
The problem has become so pressing that Beijing accepted a partial trade deal with the United States last month, in part to resume imports of American food. 

Pig prices have climbed so high that one livestock company, Guangxi Yangxiang, printed red banners to recruit potential farmers that read, “Raise 10 sows and drive a BMW next year.”
Stopping the epidemic was always going to be tough. 

Small farms, often packed together in crowded agricultural areas, produce nearly half of China’s pigs. To stop diseases from spreading, Chinese officials have to reach millions of traditional small farmers.
China’s leadership has focused on remaking farming to stop the spread. 

With generous subsidies, Beijing has ordered governments and businesses to build industrial-scale farms with safeguards like quarantine areas for new arrivals and incinerators for diseased pigs.
That solution could help long-term, but China’s immediate response has made the spread worse.
When the swine fever began to spread 16 months ago, the Ministry of Agriculture told the country’s local governments to cull all pigs in herds if there was even one sick animal, and to compensate the farmers. 

The ministry authorized local governments to pay up to $115 for the largest pigs, a cap later raised to $170. 

Before the epidemic, however, many pigs sold for $250 or more apiece, particularly breeding sows, according to government data. 

With the epidemic, the price has soared to $600 or more.
To get that partial reimbursement, many farmers had to deal with tightfisted local officials. 

The ministry said it would reimburse local governments only for between 40 percent and 80 percent of their costs. 

Local governments also had to provide proof, often including laboratory tests, that pigs died of Chinese swine fever and not some other ailment.

Su Dezhi, a 34-year-old butcher in Guo Village, said that he had gone from selling two pigs a day worth of pork to half a pig.

As a result, culling has been slow. 

Official data show only 1.2 million pigs, or less than 0.3 percent of the country’s herds, have been culled. 

It is not clear where the rest of the country’s vanished herds went, but food experts say many were likely butchered and turned into food. 

That would worsen the spread, because the disease can lurk in meat for months.
Australia has found that almost half of the sausages and other pork products carried by recently arriving Chinese passengers or the mail were contaminated, said Mark Schipp, the president of the 182-nation World Organization for Animal Health in Paris and Australia’s chief veterinarian.
In Wulongqiao, a quiet village in the low, pine-studded hills of northern Hunan Province, a number of farmers said they did not bother with seeking compensation, citing the low payout.
Where many pigs went is a mystery. 

Mr. Peng, the farmer, said that when he slaughtered his pigs, he had panicked and buried them in secrecy, and so had no record of what became of them. 

He filed for the loss under his commercial insurance, which covered only a tenth of the value of the pigs, he said.
Chinese officials have tried to be reassuring. 

In April, July and October, officials said they had brought the disease under control, only to see signs of further spread. 

Each new statement was provided by a less senior official than the one before. 

Most recently, the agriculture ministry said that it only hoped production at the end of next year would be four-fifths of normal levels — still a shortfall equal to the entire pork production of the United States, the world’s second-largest pork-producing nation.
For now, dying pigs and rising pork prices are changing diets and cooking practices across China.
Su Dezhi, a pork butcher at an open-air market about 20 miles from Mr. Chen’s farm, said that he used to buy and carve up two pigs a day for sale. 

Now he can only sell half a pig a day. 

The wholesale price per pound for him to buy pigs has more than tripled.
“I can barely cover my costs,” he said, a large cleaver in his hand as he stood behind a table with only a few bloody slabs of pork.

Chen Zhixiang, 36, is among the very few pig farmers in Wulongqiao who have not lost any pigs.

Yet many in China seem reluctant to eat anything else. 

Across an aisle from Mr. Su stood several large cages full of chickens and ducks. 

But the poultry vendor, She Xinbao, said that his sales had only increased from about 30 birds a day to 33 or 34, partly because poultry prices have also risen.
Those who have pigs have enjoyed the surging prices. 

Chen Zhixiang, a 36-year-old pig farmer with a black dragon tattoo on his right forearm, is among the very few pig farmers in Wulongqiao who have not lost any pigs. 

He said he had cooked meals for his pigs from raw corn this year rather than buy feed that might be contaminated.
Pigs have become so rare in his part of Hunan Province that when he drives to a village these days to sell an animal or two, he draws a crowd.
“People gathered around the truck to stare at them,” he said. 

“It’s like they were seeing a panda.”

China’s pig herd predicted to shrink by 50% thanks to swine fever

• China’s pig herd could halve by the end of 2019 from a year earlier.
• The decline has been much worse than confirmed by agriculture officials, who this month launched an investigation of local authorities’ efforts to contain the disease.
• Production may take more than 5 years to recover to levels prior to the deadly outbreaks as challenges including a lack of solutions to prevent the disease and a lack of capital will restrict restocking.

Reuters

A hired hand feeds a sow which recently gave birth to a new litter at the Grand Canal Pig Farm in Jiaxing, in China’s Zhejiang province.

China’s pig herd could halve by the end of 2019 from a year earlier as an epidemic of Chinese swine fever sweeps through the world’s top pork producer, analysts at Dutch bank Rabobank forecast on Tuesday.
The bank said China’s herd, by far the world’s biggest, was already estimated to have shrunk by 40% from a year ago, well above official estimates which have ranged from 15% to 26%.
The forecast comes amid industry speculation that the decline has been much worse than confirmed by agriculture officials, who this month launched an investigation of local authorities’ efforts to contain the disease.
Rabobank said China’s pork production in 2019 was expected to fall by 25 percent from the previous year, a smaller drop than pig herd loss due to the large number of animals slaughtered in first half of 2019.
Output of pork, China’s favorite meat, will likely drop by a further 10% to 15% in 2020, it said in a report.
Production may take more than 5 years to recover to levels prior to the deadly outbreaks as challenges including a lack of solutions to prevent the disease and a lack of capital will restrict restocking, it added.
Reuters reported earlier this month that as many as half of China’s breeding pigs have either died from Chinese swine fever or been slaughtered because of the spreading disease.
Rabobank, which late last year estimated China’s pig herd at 360 million animals, said in April that up to 200 million pigs could be culled or die due to the disease, while pork output could fall by 30 percent.

Sick Pigs of Asia

UBS was kicked off a $1 billion bond deal for a joke about Chinese pigs

• UBS and China are in a bitter dispute over an economic briefing which Chinese interpreted as a racial slur.
• On Monday UBS was excluded from advising one of China's biggest state-owned companies on a billion-dollar bond deal.
• Paul Donovan, the chief economist at the bank's wealth management arm, made the comments during an audio briefing published last Wednesday: "Chinese consumer prices rose. This was mainly due to sick pigs. Does this matter? It matters if you are a Chinese pig."
• UBS says the comment was "innocently intended." 

By Will Martin

Paul Donovan, the chief economist at UBS's wealth management arm, has made a costly joke

UBS has been excluded for a billion-dollar bond sale by a Chinese company, the latest fallout from an emotive dispute between the bank and Chinese government over whether a remark by a senior UBS economist was racist.
The row is over a comment about the Chinese pork industry made by Paul Donovan, the chief economist for the UBS wealth management arm, during a daily audio briefing circulated to clients and journalists last week.
In the Wednesday edition of the briefing, Donovan briefly discussed the growing epidemic of swine fever in China, which has impacted the supply of pork in the country, the world's largest consumer of pig products.
He said: "Chinese consumer prices rose. This was mainly due to sick pigs. Does this matter? It matters if you are a Chinese pig. It matters if you like eating pork in China. It does not really matter to the rest of the world."
The comments were interpreted by Chinese as comparing the country's citizens to pigs, and led to an article in China's state-controlled Global Times newspaper accusing Donovan of using "racist language to analyse China's inflation."
China's pork consumption falls as Chinese swine fever spreads.

On Monday, the row appeared to deepen when UBS was excluded from advising one of China's biggest state-owned companies on a substantial bond deal.
China Railway Construction Corporation said it decided not to include UBS in a bond deal, according to Reuters, although it did not give a reason for the snub. 

The Financial Times earlier reported that it was as a result of Donovan's joke.
UBS had previously won a mandate on the sale, which is believed to be worth between $500 million and $1 billion, the FT reported.
UBS declined to comment on the bond sale when approached by Business Insider.
Chinese outrage at the comments led to Mr. Donovan being placed on leave by UBS.
"We confirm that we have asked Paul Donovan to take a leave of absence as we review this matter, to evaluate whether further steps need to be taken," the bank said in a statement Friday.
UBS says that the comments were entirely innocent, and held no derogatory meaning.

Paul Donovan did not respond to a request for comment from Business Insider.
Speaking to the FT, Stephen Matthews, a linguistics professor at the University of Hong Kong said that the perceived insult by Donovan was mostly likely down to a poor translation, or a misreading of a transcript of the comments.
"The perceived insult is derived either from a misreading of the English text by a non-native speaker, or from a poor Chinese translation. Either way, the author is not at fault," he said.

China Is Bluffing in the Trade War

Chinese say they can effectively retaliate against Trump’s tariffs. They’re wrong.

BY SALVATORE BABONES

A Chinese worker looks on as a cargo ship is loaded at a port in Qingdao, China, on July 13, 2017.

U.S. President Donald Trump’s trade war with China is about to get real. 

Until this point, not much has happened, because the 25 percent tariffs on Chinese goods that the Trump administration announced in May did not apply to goods already in transit. 

That created a four- to six-week window of opportunity for U.S. and Chinese negotiators to come to an agreement and avoid the implementation of the duties.
That window is now closing, and with no deal in sight, speculation has turned to how China might respond. 

With Chinese official media vowing no compromise in negotiations with the United States, the country seems to be settling in for a protracted siege.
Considering that China ran a trade surplus of $420 billion with the United States last year, it is obvious that it can’t come close to matching the United States in terms of tit-for-tat tariffs. 

But it does have other arrows in its quiver. 

Expert commentary and internet speculation have focused on three: an embargo on imports of soybeans from the United States, an embargo on exports of rare earth metals to the United States, and the diversification of China’s currency reserves away from the dollar.
Fortunately for the United States—and for the health of the global trading system—each of these would be an empty threat.
In 2018, as rhetoric about the trade war took off in earnest, China slapped a punitive tariff of 25 percent on American soybeans. 

Soybeans are the United States’ biggest farm export, and they are important crops in the Midwestern states that swung to elect Trump in 2016. 

The 25 percent duty has been widely cited as the root cause of low prices that have led to a wave of farm foreclosures across the U.S. heartland.
The United States’ largest competitor in the global soybean market is Brazil, so one might expect Brazilian farmers to be jumping with joy as they see more demand for their produce. 

But Brazilian soybean prices have fallen almost 20 percent since April 2018, almost exactly matching the slightly over 20 percent fall in U.S. soybean prices for that period.
The reason is simple: Soybeans are fungible. 

When China buys Brazilian soybeans instead of American ones, Europeans have to turn to soybeans from the United States to replace their usual Brazilian supplies. 

There is one, single, undifferentiated global market for soybeans. 

Squeeze it in one place, and it just pops out in another.
Indeed, the decline in soybean prices is global, and it has nothing to do with the U.S.-China trade war. It’s all about the Chinese swine fever. 

The majority of the world’s soybeans feed pigs and other animals, not people, and China’s pork producers have been hit with a nationwide fever epidemic.
As a result, Chinese purchases of U.S. soybeans have now stopped completely. 

That may look like a total soybean embargo. 

But the reality is that China just doesn’t need as many soybeans, because it doesn’t have as many pigs to feed. 

As the swine fever continues to rage, look for U.S. exports of pork products to boom.
China is by far the world’s largest producer of rare earth metals: elements such as neodymium, europium, terbium, and dysprosium that are crucial to the production of some advanced materials and electronics. 

Despite their name, rare earths really aren’t so rare, and, in fact, the United States was the world’s major producer until cheap Chinese sources undercut the market in the 1980s.
The United States still has plenty of rare earth metals, but the environmental costs of extracting them from the underlying ores are too high to make production economic. 

Refining the minerals is only cheap in China because of the country’s lax environmental standards. 

If China does place a global embargo on the export of rare earths, prices will go up to reflect the metals’ true economic costs, which would actually be a good thing (from an environmental perspective).
Anything less than a total global embargo, however, would be useless, since, even more so than soybeans, rare earths are entirely fungible. 

China found that out in 2010, when it slapped an embargo on rare earth exports to Japan. 

Analyses a few years later found that the export ban had virtually no ill effect. 

If China sells them to anyone, U.S. companies can just buy them secondhand or switch to alternative inputs to their industrial processes.
China holds an estimated $1.1 trillion of U.S. government bonds, out of a total foreign currency reserve of around $3 trillion. 

That sounds like a lot of money, but in comparison to the size of its economy and levels of international trade, China’s reserves are roughly in line with those of other developing countries. 

It’s also not a particularly large proportion of the roughly $22 trillion total U.S. government debt to the world outstanding.
Alarmists warn that a Chinese dollar dump could send U.S. interest rates soaring and the U.S. economy crashing down. 

Just about everyone else understands that the huge market for U.S. Treasury securities, with an average daily trading volume of $500 billion in the spot market—and many times that in swaps, options, and futures—could easily absorb China’s entire reserves.
Ironically, the biggest victim of any Chinese liquidation of U.S. dollar holdings could be the European Union. 

Any reduction in China’s dollar reserves holdings would have to be matched by a corresponding rise in its holdings of other currencies, and the euro is the most likely alternative. 

But eurozone government bond trading is much thinner and more fragmented than the U.S. Treasurys market. 

A massive Chinese shift into euros could see that currency skyrocketing, placing a massive drag on Europe’s big industrial exporters.
The truth is that China has very little leverage in a trade war with the United States. 

Given Beijing’s bluster, it can be easy to forget that China is still a relatively poor country with a GDP per capita less than one-sixth the U.S. level. 

Compared to the America’s, China’s economy is relatively inefficient and undifferentiated, and its markets are poorly developed.
The simple fact is that China needs the United States more than the United States needs China. 

In itself, that’s no reason to start a trade war. 

But if the trade war really does heat up, there’s little doubt who will win.

Death by China

Pig market in lockdown as Chinese swine fever spreads

By Dominique Patton and Hallie Gu

A police officer checks a truck transporting pigs on a highway in Shanghai, China, January 12, 2017. 
BEIJING -- For pig trader Fang, the discovery of the deadly Chinese swine fever last month has brought his once booming business to a sudden halt.
From northeast Liaoning province, Fang used to truck up to 600 pigs a day as far away as Guangdong, some 2,700 km (1,680 miles) to the south. 

But an outbreak of the highly contagious disease means transport of pigs out of Liaoning has been banned.
Fang, who declined to give his second name, said his 30 staff are on leave, and he doesn’t know when business will recover.
“I have been trading pigs for 16 years and have never seen anything like this,” he said.
China on Thursday reported its tenth case of the disease in just over a month. 

Efforts to control its rapid spread by banning transport of live hogs from and through infected areas has left traders idle, farm pens bursting with pigs, and slaughterhouses short of stock.
It has also pushed up pork prices in the country’s populous south as demand rises ahead of a week-long holiday in October, raised the prospect of imports, and underscored the limitations of a government push to promote livestock farming in the northeast cornbelt.
China is largely self-sufficient in pigs, but a major campaign to tackle farm pollution in recent years forced many piggeries in the south to close, while those in the northeast expanded to take advantage of plentiful grain and government support.
However, the south remains home to the bulk of slaughterhouse capacity, while consumers prefer freshly prepared pork, far and away China’s most popular meat. 

Experts estimate more than 30,000 pigs are trucked out of the country’s north each day.

TRANSPORT DILEMMA
The sweeping new transport restrictions in the wake of the outbreaks are now taking a growing toll on the annual $1 trillion industry.
At a breeding farm in Liaoning’s provincial capital Shenyang, around 8,000 piglets are stuck in pens, unable to reach customers outside the city, said a worker who declined to be identified.
“We have thousands of piglets that will soon be too mature to sell [to farms for fattening]. We have no choice but to raise them to hogs,” she said.
And while inventory builds in the north, slaughterhouses further south are struggling to find enough pigs. 

A worker at Zhouzhuang Slaughtering and Processing Co Ltd based near Wuxi in eastern Jiangsu province said the government this week banned sourcing pigs from outside the city.
“Wuxi doesn’t have any more pigs. In two or three days time, we’ll have nothing to slaughter,” he said.
The situation has pushed up the gap between prices in the north and prices in the south to as much as three times normal levels, said traders.
Average live hog prices in Liaoning fell to 12.02 yuan ($1.76) a kg on Tuesday, not enough to make a profit, said a Shenyang farmer surnamed Wang.
In southeast Zhejiang province however, which borders the cosmopolitan hub of Shanghai, prices spiked to 17.74 yuan a kg this week, up 23 percent since early August.
Swine fever divides China's live hog market: reut.rs/2wKrXmz


IMPORT DEMAND
So far, Beijing has said that it expects only a short-term rise in pork prices.
National wholesale pork prices are at their highest since the Lunar New Year festival in mid-February, but are still well below levels when the government has previously dipped into state reserves to calm the market.
However, Beijing has also warned the situation is difficult to predict. 

Many experts expect more cases and a further tightening of supplies in the south.
“China’s execution of biosecurity protocols has lots of flaws. The government is not capable of controlling the disease, and it will get harder and harder to process the situation,” said a Shanghai-based pig farm consultant who declined to be named.
With more cases emerging, there will be more restrictions on transport, he added, leading to tighter supplies.
That could lead to a pick-up in imports, said Pan Chenjun, senior analyst at Rabobank.
“I think given the soaring price in many regions, China will soon need to import more pork. There’s already a supply issue in the south and big cities like Beijing and Shanghai,” she said.
China imported about 2.3 million tonnes of pork and pork products last year, according to Chinese customs data, out of total consumption of about 55 million tonnes.
Soeren Tinggaard, vice president at Danish Crown, Europe’s biggest pork exporter, said the firm had not seen any signs of growing demand yet but was watching the situation closely.
Liaoning trader Fang said he expected business to improve if the transport curbs in Liaoning, initially put in place for six weeks, are lifted towards the end of the month.
However, with five new cases discovered in the past four days, experts say new restrictions are likely.
Even if they are lifted, slaughterhouses may still reject pigs from the north, lamented Shenyang farmer Wang.
Average meat consumption by country: reut.rs/2LgvA8e



The world's top ten pork producers: reut.rs/2nUvFp7