Pigs at a farm in Jiangjiaqiao village in northern China's Hebei province. Photo / AP
Pigs at a farm in Jiangjiaqiao village in northern China's Hebei province. Photo / AP
COMMENT:
The swine fever epidemic has been described by scientists as the biggest animal disease outbreak we've ever had on the planet.
Given that scale it seems a bit of an understatement to talk about the butterfly effect.
That's the idea that a small event somewhere can have implications thatripple far and wide – i.e. a butterfly's wings cause a tiny atmospheric disturbance which snowballs to result in a hurricane on the other side of the world.
It is relevant in the sense that this news story still looks a distant - dramatic but far removed.
And while New Zealand is not a significant pork producer, our fortunes are tied inextricably to protein production.
It's as a major disruption to global protein markets that we should view crisis.
China's population of pigs will shrink by 134 million heads, or 20 per cent, this year, the US Department of Agriculture (USDA) says.
That puts pressure on China to import the meat – estimated by the USDA to rise 41 per cent this year to 2.2 million tonnes – to make up for the shortfall.
But that's just the start.
Customers buy frozen pork at a local market in Hong Kong. Photo / AP
Bloomberg reports that while official estimates count 1 million culled hogs, slaughter data suggest 100 times more will be removed from China's 440 million-strong swine herd in 2019.
Christine McCracken, senior animal protein analyst at Rabobank, has estimated that 200 million pigs could eventually be culled in China — more than half the pigs in the country, which supplies around 50 per cent of the world's pork.
Thankfully, the disease doesn't effect humans but it is spreading - through Mongolia, Vietnam and Cambodia and now into Eastern Europe.
"This is the biggest animal disease outbreak we've ever had on the planet," Dirk Pfeiffer, a veterinary epidemiologist in Hong Kong and expert on African swine fever, told The Guardian. "It makes the foot and mouth disease and BSE outbreaks pale in comparison to the damage that is being done. And we have no way to stop it from spreading."
Despite a spike of roughly 40 per cent in pork prices, they still haven't topped relatively recent highs hit in 2016.
So in terms of market impact we haven't really seen anything yet.
But it is almost certainly coming. All the signs are pointing to a market shift of historic proportions.
Global food scares are often a double-edged sword for New Zealand.
As long as they aren't directly happening to us they tend to be positive for our export prices.
Beef and Lamb NZ chief executive Sam McIvor told the Herald this week that the outbreak had given the New Zealand meat sector a boost, both in terms of value and volume.
From January to April, sheepmeat exports to the PRC shot up to 95,000 tonnes from 75,000 tonnes at the same time last year.
For beef, exports almost doubled to 67,000 tonnes from 36,000 tonnes over the same comparative periods.
In terms of value, beef receipts shot to $476 million from January to April from $244m a year earlier.
A worker pushes a beef carcass at the meatworks in Horotiu. Photo / File
We may even see the impending pork shortage drive demand for lamb and dairy products.
Economists who look at food consumption trends tend to group foods by nutritional class.
When dairy prices spiked too high several years ago we saw cheese consumption drop as consumers switched to alternative proteins. The price followed.
But these things are never simple and there are risks for New Zealand
This is clearly not good news for China's economy – already struggling with the trade war and slowing consumer demand.
Any headwinds to the Chinese economy eventually flow through to New Zealand in terms of consumer demand for our higher end products and in tourist numbers.
Meanwhile there are also risks of other undesirable trade outcomes.
As a response, China has started to relax meat import restrictions for less favoured nations.
If the nation opens up to more sheep and beef from the likes of India, Russia and Mongolia then there is a risk New Zealand exporters could lose some of the competitive advantage they enjoy as part of the Free Trade Agreement.
Events like this can come out of the blue and change the all equations for economists.
Given the forecasters are already up to their neck in the global politics of trade wars, oil, tech disruption and low inflation this is hardly a welcome addition.
If all this wasn't enough of a big deal, we should also consider the fundamental place that food supply issues have in much of the big social upheavals of history.
From the French Revolution to the Arab Spring, food shortages and price shocks are notorious for sparking social unrest, popular uprising and political change.
The final fall-out from this outbreak is impossible to predict. Perhaps it wil be managed and controlled by the Chinese authorities with minimal impact outside of the meat trade.
But it will be a stern test of Beijing's power. One that New Zealand must watch closely.
