Events in China are taking on a life of their own - African Swine Fever update

This article is bought to you by Bruce Robertson Transport. 

By Aidan Connolly, Chief Executive Officer & President at Cainthus. 

How African Swine Fever is wiping out China’s Pork production (& how to make the Global Food system Anti-Fragile). 

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Events in China are taking on a life of their own. Everyday new outbreaks of African Swine Fever (ASF) show the rapid spread of the disease, and the manner in which Chinese authorities are struggling to contain the virus. Ironically in the zodiac’s ‘Year of the Pig’ some observers suggest that China will lose over half its pig population, which means a over a quarter of the world’s pork.

Is this the Black Swan pandemic predicted by agriculture experts during previous disease outbreaks worried about growing human movements, world trade and the globalization of business? The term Black Swan, coined by Nassim Nicholas Taleb, is used to suggest the impact of highly improbably events, that people didn’t think of in advance but could have positioned themselves to benefit from.  

Could ASFs arrival in China have been foreseen? This virus, almost 100% lethal for pigs, was first recognized in Kenya over 100 years ago, and has slowly spread in Europe and Russia, primarily through wild pigs and boars. In recent years the spread has accelerated, has now been reported in 55 countries. It is highly transmissible, especially in blood, whether the pig is dead or alive. Not spread in the air, but by contact, it can live months in blood, 14 days in manure, 300 days in sausage, and 1,000 days in frozen meat. It is swine specific, so does not harm humans, although little research has been done on this. Just one drop of blood from an infected pig contains 50 million virus cells.

Probably given where the virus had spread to and the means by which it has been spread. The challenge is that there is no effective vaccine for ASF, despite 50 years of investment. ASF is by molecular size the largest virus known to humans, with 150 proteins in its structure, making the creation of an antibody almost impossible. Crispr or other gene editing processes haven’t shown ability to control it. Different strains of the virus have also been identified.

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What are the implications of ASF on China’s agriculture?

Different sources have wildly differing estimates of how much pork will be lost. Official numbers suggest 1 million pigs have been slaughtered, but no sources I can find support that number, with all believing it to be a vast underestimate. Breeding sow numbers are reported to be down between 26% and 41%. Meat production hasn’t shown the same level of decline yet, with the USDA reporting a shortfall of just 13%. On my recent visit to China this was supported by comments indicating that the virus is primarily affecting smaller farms, those with lower biosecurity but also less productivity. In fact five new investments are planned in large, biosecure farms that collectively would grow 5 million more pigs.

The rapid spread of the disease in China is the result of multiple factors; the structure and density of thousands of small farms on the Eastern seaboard of China, poor biosecurity on these smaller farms, a transportation systems being used for multiple purposes such as feed and live animal transportation.

Other observers suggest that the final impact of ASF will reduce the herd by 50% and result in a similar drop in pork production over the next 3 years. Does this represent a medium term change which won’t change Chinese pork consumption longer term or will it have a similar effect to the UK’s consumer behavior post Foot & Mouth/BSE which led to a long term decline in Beef?

While a 50% drop may seem unnecessarily pessimistic let’s play out this scenario and its implications.

1)    Pork prices in China and world will go up.

Implications: This is already happening with prices in China up 40%, and prices in other countries rising as the worlds largest pork market begins to suck up supplies through imports.

Illegal activities have also increased. Infected pork has been sold in China by unscrupulous food producers, with it being detected recently dumplings. Chinese borders are reported also to be more porous to unregistered imports.

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ASF will hasten the growth in China in broiler meat, which has been slower than in other markets because of cultural reasons. Chicken to become the world’s No.1 meat by 2022.

Implications: China is the world’s largest producer of feed, and pig feeds. A drop of 38 Million tons of feed as a result of 50% less pigs would represent about 4% of global feed production, over 13% of world pig feed.

Corn is locally sourced, so a 20 million ton drop in consumption could lead to a collapse in local demand and depress prices despite government supports. Soybeans are primarily imported, so a drop of 10 million tons would disrupt export markets globally, affecting Brazil, the US and India, but cheaper soybeans would mean increased other uses (Petfood, Hi-Pro Soy, Aquaculture etc).  

Unknown is how long it might be before feed production for other species in China (Poultry, Beef) and pork imports in other countries, increasing proteins and cereals usage there, might plug those gaps and increased global corn prices seem to reflect that already.

Clearly less feed in China has knock on effects, even allowing for increases in other feed markets as exporters receive orders to supply China with meat.

China has banned the use of pork byproducts such as Plasma being used in feed, because of the inherent risks. Food waste and slops have also been banned by authorities.

This drop-in pig feed production has already huge implications for products such as lactose and whey, which are a fundamental part of a young pig’s diet.

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Pig feed additives markets such as vitamins, enzymes, amino acids will all be severely disrupted.

The rapid changes of swine farming over the past 5 years would take any except the most seasoned China watchers by surprise. From over 50 million breeding sows the herd was reduced to 32 million and with ASF I was told it is now predicted to drop to 26 million. By global standards this is unprecedented and indicates the Chinese Government’s desire to create a modern, secure food supply. Small holder farmers are inefficient, produce expensive pork, have a higher environmental impact but also have been associated with multiple food recall scandals. Implications; Farms of 50,000 sows will replace those of 5 or 50.

IS this the crisis that sets off the next global recession? Will it hit the US/Europe? What geopolitical problems could it cause? Is the economic problem large enough that it will echo far beyond agriculture. How could it be used in Trade negotiations between China, the US and other countries, play a part in political power moves, between the world’s superpowers, each trying to squeeze the other.

The only surprise in this Black Swan event is that we are surprised. Just as the first person to see a Black swan in Australia when until then we had only seen white ones clearly global disease pandemics in our food and agriculture systems are an inevitable part of our future. Our global food system should accept this reality and be structured accordingly.

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So what does an anti-fragile system, resistant to shocks and prepared for crisis look like? Doesn’t it mean a back to the future approach to food and grain reserves, which have been at similar levels on a storage to use basis for 30 years. The Digitization of agriculture is inevitable is inevitable, but the ability to remove human interventions through the use of sensors, IOT devices, computer vision, and robots allows not just for superior decision making but also to remove a major vector of disease transmission, i.e. humans. The advent of gene editing systems such as Crispr will become even more urgent in a world where losing substantial food production is a constant risk. The desire for local production must be weighed against the challenges of controlling diseases in such environments. Detection systems, driven by model analytics and data, are will become the new norm. Could a loss in confidence by the consumer continue the trend to explore plant-based diets, or indeed alternatives to animal proteins (Insect meals, Petri-dish proteins) or will the Chinese cultural association that 'pork is health' continue and ensure a return to pre disease consumption levels.

Only an anti-Fragile system will prepare our global food system for the next Black Swan.