African Swine Fever clouding the true picture…

By Peter McMeekin

Chinese scientists have detected two new variants of the African swine fever virus (ASFv) that may render control of the disease even harder to achieve. The findings of the research, conducted at Harbin Veterinary Research Institute, were released in late February and found the two evolving strains were highly transmissible but less virulent than the dominant strain, making them more challenging to identify.

It came as no surprise to the researchers to find complex genetic diversity in the field considering the vast population of pigs in China and the prevalence of African swine fever (ASF) in the country’s pig population for more than two years.

The scientists took 3,660 samples from farms, abattoirs and disposal plants across seven provinces in the second half of 2020. They isolated and distinguished 22 viruses belonging to the ASFv genotype with all having mutations, gene deletions or replacements compared to HLJ/18, the original isolate detected in China in 2018.

However, it is the emergence of the two lower virulent natural mutants that creates the greatest challenge for ASFv control as signs and symptoms of the new variants are far more difficult to recognise in the field. Furthermore, low virulence does not mean lower risk as the emerging strains are just as deadly as the original variant.

Despite constant promises, there is still no commercially available vaccine for the control of ASFv in China. Therefore, disease management relies on early and rapid detection, followed by the immediate culling of infected animals. But experts say low standards of biosecurity, lack of an industry-wide oversight regime, and local government cover-ups of outbreaks have allowed the disease to spread.

Before the outbreak of ASF, the swine population in China was 435 million head or around 50 per cent of the global herd. Officially, this fell 42 per cent to about 254 million head at the peak of the outbreak leading to farm closures and a severe shortage of pork for Chinese consumers. Some unofficial reports put the decrease in animal inventory even higher, at 60 per cent of pre-ASF levels. 

China accounts for almost 50 per cent of the world’s consumption of pork. The supply shortfall pushed domestic prices to record levels in 2020 as the economy recovered from another virus, COVID-19. Imports increased substantially, and the government was forced to tap into pork reserves to fill the supply gap and quell rising prices.

The Chinese government has been quite bullish and vocal about the recovery of the big herd. The agriculture ministry recently announced that they expected sow and pig numbers would be back to pre-outbreak levels by the middle of 2021. But Simon Quilty, of Global AgriTrends, doubts the optimism. He believes a second wave of ASF has killed between seven and eight million sows in the last two months alone, putting a severe brake on the resurgence.

Despite the elevated quarantine regimes and the swift development of large state-of-the-art piggeries, there are still many challenges ahead for the pork industry in China. And according to Simon there is plenty of data suggesting the government rhetoric differs significantly from the real picture. Who would have thought?

Domestic piglet prices recently hit 98 renminbi (RMB) per head, almost four times the 25RMB being paid prior to the outbreak in 2018. Hardly a rational price reaction to ample supply! Similarly, hog prices are more than double pre-ASF prices at 30-40RMB per kilogram. And breeding sows are around two and half times the early 2018 price.

China’s protein shortage is also reflected in domestic meat prices, with pork currently retailing at about 135 per cent higher than the average price paid in the three years before the outbreak. The retail price of beef is more than 40 per cent higher than the same base period. 

Chinese meat imports have also soared. According to Chinese government data, imports of pork, beef and chicken combined in 2017 totalled 2.7 million tonnes. By 2020 that had risen by more than 325 per cent to 8.8 million tonnes, due primarily to the plunge in domestic pork production following the ASF outbreak. The trend has continued into 2021 with China importing 1.6 million tonnes of meat in January and February, a 27.6 per cent jump from a year ago.

Now, the new multi-storey ‘super-piggeries’, built to increase efficiency and improve disease control by shifting production away from smaller backyard operations, has become the challenge. They house an enormous number of breeding sows and followers, but they are also an excellent incubator for the disease once it infiltrates the system. If one farm gets infected, the production loss is enormous compared to that from a small family-run operation.

Ironically, China's first hog breeding exchange traded fund (ETF) debuted on the Shenzhen Stock Exchange last Friday. Trading as Penghua Fund Management’s CSI Livestock Breeding ETF, it is the first of three tied to the country's pork sector, investment in which is booming on the back of the high domestic prices.

So, what impact will the latest outbreak have on Chinese feed grain demand? Much has been made of the massive uptick in imports, particularly corn, and to a lesser degree wheat, in the last 12 months. But this is not all about the recovery in the country’s pig herd. In fact, it is more about historically poor management of the country’s inventory.

Back in early 2016, the government made a significant policy change. It decided to cease subsidising domestic corn production by allowing prices to be set by the market while at the same time auctioning off the strategic reserves. 

But it seems the government took their eye off the ball. Domestic demand increased, but production plateaued. Feed grain inventories went from burdensome in 2015 to tight in 2018. Beijing needed to replenish the stockpile by slowly growing imports. Enter Donald Trump and the China-US trade war, which stymied the campaign. The outbreak of ASF and then COVID-19 both conspired to further derail the inventory rebuild process.

Despite the latest ASF outbreak, the low feed grain reserves will continue to drive China's import demand for corn and wheat in the short term. The commodity at greatest risk of an ASF led fall in Chinese demand could well be soybeans, as the pork industry is the biggest driver of soybean meal demand. With the US export campaign all but done, this would likely manifest itself in a deferral of Brazilian exports for the balance of the 2020/21 marketing year. 

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