Why Your Grocery Bill Is Rising - OZY | A Modern Media Company
In this picture taken on July 10, 2019 a butcher (L) sells porc meat to a customer at her stall at a market in Beijing. - China's pork industry has been left reeling from African swine fever, which has devastated its pig herd, sent pork prices soaring and forced the country to increase imports to satisfy demand -- and analysts warn worse is yet to come.
SourceNICOLAS ASFOURI / AFP / Getty

WHY YOU SHOULD CARE

When a pig sneezes in China, it affects your wallet.

By Emiko Terazono

What happens in China never stays in China. African swine flu among Chinese pig herds has led to the loss of hundreds of millions of pigs. Chinese domestic pork prices have rocketed as the country’s pig population, normally about 450 million strong, has dropped by more than half. The country’s meat imports have leaped too, as Beijing has sought to fill the gap.

“China’s imports have increased across all meat products, including beef, pig and poultry,” says Upali Galketi Aratchilage, analyst at the U.N.’s Food and Agriculture Organization. And China’s woes have rippled outward:

World food prices reached their highest point in more than two years in November.

The FAO’s monthly food price index was up almost 10 percent last month from a year earlier, recording its largest annual rise since July 2017. Global meat prices gained 18 percent, the most in eight years, reflecting China’s strong demand ahead of year-end festivities.

New outbreaks of African swine flu, a deadly virus that affects pigs and wild boars but not humans, are still being reported in China. The virus has moved into neighboring countries including Mongolia, Vietnam, North and South Korea and the Philippines.

China’s pig herd is likely to decline further in the first half of next year, before rebounding in the second, according to Justin Sherrard, a strategist at Rabobank. “Overall, we think China will have a flat year [in pig numbers],” he says.

China is the world’s largest meat consumer, accounting for almost a third of global demand. The country has imported almost 50 percent more pork and chicken this year, according to Gro Intelligence, a commodity data group.

Beijing has been calling for a shift away from pork consumption to other meats such as beef and poultry. Gro expects chicken consumption to rise by more than one-fifth this year from 2018, while beef demand is predicted to increase by 17 percent.

The meat shortage has led to Beijing issuing new export licenses to meat processing plants in Europe and Brazil, while reopening its market to Canadian supplies. The flow of Canadian agricultural imports to China had stalled after a diplomatic feud earlier this year.

Despite an ongoing stalemate in trade talks with the U.S., China has stepped up its pork imports, according to the U.S. Department of Agriculture. The USDA forecasts that China’s 2019 imports will increase almost 67 percent compared with 2018, to 2.8 million tons. Overall, U.S. pork exports in the third quarter were up 17 percent from a year ago, while fourth-quarter exports are expected to be a record 2 billion pounds.

The November FAO index was also buoyed by a rise in the price of vegetable oils, in addition to the squeeze on meat. The vegetable oils index was more than 10 percent higher than a year ago, lifted by increased demand for biodiesel production and expectations of supply shortages in 2020.

International palm oil prices were also up for the fourth consecutive month, extending a rebound in prices from multiyear lows registered late in 2018. Output of palm oil has been affected by dry weather in key producing countries, while Indonesia and Malaysia have been increasing the level of biodiesel mandated to be blended into ordinary fuel. The FAO noted that rapeseed and soybean oil prices were also higher, due to tight supplies.

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By Emiko Terazono

OZY partners with the U.K.'s Financial Times to bring you premium analysis and features. © The Financial Times Limited 2020.

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