Friday, August 31, 2018

Fifth African Swine Fever Outbreak in China

On August 30, China's Ministry of Agriculture and Rural Affairs confirmed that African Swine Fever (ASF) was the cause of illness and death in a herd of 459 pigs on a farm in Anhui Province's Wuhu municipality. Testing was conducted by the National Animal Disease Control Center after 80 pigs on the farm died and 185 became ill from unknown causes. All pigs on the farm have now been culled and emergency measures have been taken to prevent stop movement of pigs out of the area.

The ASF outbreak in Anhui Province is China's fifth confirmed this month. The disease was first discovered August 1 on a farm in the northeastern city of Shenyang. Since then the disease has been discovered in widely scattered locations: in a load of pigs arriving at a slaughterhouse in Zhengzhou, and at farms in Jiangsu Province's Lianyungang municipality, in Zhejiang Province's Wenzhou, and now in Anhui Province's Wuhu municipality.
Occurrences of African Swine Fever confirmed in China, August 2018
Surveillance efforts earlier this year focused on the border with Russia in Heilongjiang Province. According to an investigation, the load of infected pigs arriving in Zhengzhou that had been loaded on a truck in Jiamusi, Heilongjiang Province August 12, but the presence of the virus has not been detected there. The Shenyang, Lianyungang, and Wuhu out breaks have been on modest-sized farms with hundreds of pigs, and the Wenzhou outbreak was in a livestock-raising zone where farmers keep their pigs together.

There has been no conclusive results about the source of the disease or how it has spread. Several theories have been floated:
  • The virus could have been introduced in smuggled or imported meat. A New Tang Dynasty report speculates that a July shipment of pork from Russia "to fill the gap left by American pork" could have introduced the virus. Others have noted that three of the first outbreaks have been in coastal ports far from Russia. 
  • The "American conspiracy theory" apparently based on a purported link between the concentration of outbreaks of ASF near Chinese ports and timing of NATO Naval exercises held in the Baltic Sea during June, prior to the outbreaks.
  • "Garbage-feeding theory." The virus can be spread through infected pork products or waste water in slop fed to pigs which is not uncommon on the outskirts of Chinese cities. There have been no reports confirming that farms affected by outbreaks fed slop to their pigs. 
  • The China outbreak followed the soccer World Cup held during June-July in Russia -- the focus of ASF outbreaks over the last decade.
  • There has been an uptick in travel and trade between China and ASF-infected regions of Eastern Europe and Africa as part of China's One Belt One Road initiative. These include many projects in agricultural areas.
A Chinese Academy of Agricultural Sciences pork analyst noted that the load of pigs purportedly shipped from Heilongjiang to Zhengzhou could have contracted the virus from manure, urine, or blood in one of the six provinces they passed through. A veterinarian at the Academy said most local veterinary stations don't have the equipment to detect the virus, and it takes two days to send samples to a provincial or national lab for testing. 

Chinese Agricultural officials have assured the population that African Swine Fever cannot spread to humans, but anecdotal reports indicate that consumers are avoiding pork. Northeastern consumers were said to be shunning pork after the first outbreak in Shenyang. Last week, a reporter found that consumers in Zhengzhou were switching to beef and lamb, and he/she found most of the pork counters abandoned in food markets near the Wenzhou outbreak. 

The impacts on the market are uncertain. Reports show hog prices falling in some regions and rising in others. Farmers could accelerate slaughter of hogs to get ahead of the spread of the disease, depressing prices in the immediate term. Due to disease concerns, farmers are reportedly hesitant to stock up on pigs, but the peak consumption periods are on the horizon with the September mid-Autumn festival, October 1 National Day, and February Spring Festival coming up in the next four months. Supplies of imported pork are constrained by prohibitive retaliatory tariffs imposed on U.S. pork in July. 

Thursday, August 30, 2018

China Food Security Propaganda Turned Up

The Chinese Government has turned up the volume on its food security propaganda this month as the country faces shrinking output of major farm commodities while the United States and Brazil are turning out monster crops. 

On August 24, the chief of the National Bureau of Statistics rural office issued a proclamation that national grain production is basically doing well. Noting that the issue of maintaining the food supply for more than 1.3 billion people is a "first class issue" for governing the nation, he recited the creed of the necessity of relying on domestic production in a new era with changes in the agricultural sector.

The same day, the chief statistician from the same office explained that their estimate of a 4.3-percent decline in this year's early rice crop is not a concern since the country's inventory of rice is relatively large.

On August 27, a spokesperson for the Administration of Grain and Commodity Reserves assured listeners that the plummeting volume of wheat purchases this summer is not a threat to food security. From June through August 20, purchases of wheat by all types of enterprises totaled less than 42 million metric tons, 21 mmt less than last year at this time. This spokesperson also assured the public that there is lots of wheat in inventory to keep the supply stable.

August 22, Ministry of Agriculture and Rural Affairs director of rural institutional management noted that grain is a large country's powerhouse and declared that the inventory of farmland must be the protected at all times. He warned that the stock of farmland must never cross the "red line" of 1.8 billion mu (120 million hectares) in any place or any time, and land must not be diverted to other uses or brought into real estate development. He recited the same food security rhetoric and added some flourishes about "rural revitalization."

Maybe the food security propaganda blitz was prompted by "Northeast Corn and Soybeans Encounter Drought Over Wide Areas; Will Grain Supplies be Reduced?" published August 20 in Securities Times. In a rare departure from the party line, Securities Times said a reduction in corn yield is likely this year due to widespread drought in northeastern regions, plus damage by army worms and hail storms. Additionally, the article estimated that China's soybean area is down 1.7 percent this year: farmers were discouraged by poor returns from soybeans and difficulty selling last year's soybean crop and the announcement of fat soybean subsidies came too late to change planting decisions, Securities Times said. The article cited the 33-percent decline in wheat purchases and reported observations from news media that output in parts of Henan Province had declined sharply this year. One wheat trader quoted by Securities Times said, "As I went from county to county in Henan, I heard about unprecedented declines in production." Farmers expecting wheat prices to surge are holding on to their crop instead of selling it. Flour mills are not able to procure adequate amounts of quality grain.

Could it be that government officials have other information showing their farm policies are not working? The Ministry of Agriculture and Rural Affairs official's stern warning about loss of cropland to development could reflect the discovery that local officials have not been reclaiming enough new land to replace land lost to the vast real estate developments, industrial parks and highways.

The National Bureau of Statistics rural survey official also pointed to the importance of preserving land in his remarks, but it was the only item for which he reported no statistics. He reported statistics on tractors, irrigation facilities, and new-type farm operators from the agricultural census conducted last year, but nothing about cropland area. In fact, it was previously announced that the census will NOT report a new inventory of cropland--the piece of information that is most fundamental to farm production statistics--instead they will rely on a dicey number reported by the Ministry of Land Resources that has been suspiciously stagnant for years at a level just above the so-called "red line" of 120 million hectares.

Is it possible that the scaling-up of farms is not going well? The initial set of ag census results released last year showed a 2-million jump in the number of large-scale farms, but it also reported that the number of agricultural households had increased by 7 million over 10 years. The census found just half the 1.8-million farmer cooperatives officially registered were actually in operation. And why would anyone expect several million farmers with no experience farming on a large scale to be immediately successful in growing crops on hundreds or thousands of acres? Why would anyone be motivated to grow vast tracts of wheat or soybeans that bring skimpy returns when they could grow vegetables, tree saplings to sell to real estate developers, or watermelons that bring much higher profits?

Saturday, August 18, 2018

China Meat Smuggling Dodges Taxes

Trade in smuggled meat keeps some restaurant operators in business, according to an August 10 report by China's Ban Yue Tan (Comment) online magazine. China's small restaurant owners and processors struggling to remain profitable may be the most vulnerable to China's tariffs on imports from the United States. As tariffs rise higher, the incentive to smuggle is increased proportionately and China's customs authorities say they are cracking down (again).

The Comment reporter said most of the 40 merchants he interviewed in two wholesale meat markets in Chongqing--a major hub of commerce in southwest China--sold both legal and smuggled frozen meat products. Smuggled products included frozen pork, beef and poultry.

Vendors asked the Comment reporter, "Do you want [meat] with a certificate or without? It's much cheaper without a certificate."

The product without certificates was smuggled meat that lacked import clearances and inspection documents. The smuggled meat was in boxes labeled only in English, a violation of China's requirement that imported foods be labeled in Chinese. Smuggled boxes were covered with plastic bags to prevent mixing with legal products.
Described by Comment as smuggled meat on a loading dock.  

A vendor quoted prices of 460 yuan for a 20-kg box of smuggled chicken feet or 540 yuan for a box of legal chicken feet--a 17 percent discount for smuggled product.

Another vendor offered a bigger discount on smuggled beef that the reporter said was not discernibly different from legal beef: 720 yuan for smuggled and 960 yuan for 20-kg of legal beef, a discount of 33 percent.

The Comment reporter said there is no way to estimate the volume of smuggled meat sold, but he was told selling smuggled meat is an "unspoken rule." The meat arrives at the market on trucks with license plates from all over China. One driver from Henan Province told the reporter that he has been transporting meat for 5 years and has done business in 10 provinces.

The main buyers are food service establishments from all over southwestern China. The restaurant business is highly competitive and every operator is looking for ways to cut costs.

The Comment reporter described the pressure to use smuggled meat as a "Gresham's Law" in which bad meat drives out good. Many companies deal in illegal meat "as a last resort" because the high cost of legal meat would put them out of business, the Comment reporter said.

One buyer told the Comment reporter, "Business is not good now and tax-free meat is cheap, saving me money. Many people in the industry use this kind of meat, and if I use only legal meat the cost pressure would be too great."

The article in Comment--a news site operated by the communist part--appears to be part of an anti-smuggling campaign. The article concluded by recommending a crackdown on smuggling and market regulation to prevent loss of tax revenue, eliminate hidden food safety risks and maintain order in the market.

An "opinion" piece from Hangzhou's newspaper posted on Peoples Daily and Xinhua news sites on August 13 worried about the Comment article's revelation that officials who operate the Chongqing markets send text messages to give vendors advance notice of inspections, allowing them to hide smuggled product or close their shop before inspectors arrive. The Hangzhou paper noted that merchants and market managers had incentive to collude so they can split the profit from smuggled meat.

On August 14, Guangzhou customs inspectors said they intercepted a vessel carrying 427 metric tons of smuggled frozen meat on July 19.  Smugglers carried 16 containers of beef, pig feet and tongues and chicken feet that originated in the United States. The decommissioned boat stripped of monitoring gear and fitted with a fake name plate was apprehended on a river in Guangdong. Authorities say they will step up patrols on rivers in Guangdong as part of the 2018 "national sword" campaign focused on grain, frozen foods, sugar and other agricultural products.

Merchants told the Comment reporter they had seen news about crackdowns from time to time, but the cost of dealing in smuggled meat is still relatively low.

Thursday, August 16, 2018

African Swine Fever Incident No. 2

Chinese authorities appear to be chasing African Swine Fever around the country as a new discovery of the virus was confirmed today by China's Ministry of Agriculture and Rural Affairs 750 miles south of where the first cases were reported two weeks ago. 

On August 14, 30 dead pigs and 30 sick pigs were discovered in a truck carrying 260 pigs when it arrived at a slaughter facility in Zhengzhou City, Henan Province. Today, tests by China's national animal disease center confirmed that African Swine Fever (ASF) was the cause of the illness and death. 

Inspection and quarantine documents showed that the truckload of ASF-infected pigs discovered in Zhengzhou originated from a market in Heli Town, located in the Jiamusi district of Heilongjiang Province, about 1,350 miles northeast of Zhengzhou. Jiamusi is in the eastern part of Heilongjiang where authorities had been conducting surveillance earlier this year to watch for ASF in wild pigs. The new discovery of the highly contagious virus in Zhengzhou is about 750 miles south of the previous discovery of ASF in Shenyang on August 3.

Following the latest discovery of ASF in Zhengzhou, Chinese authorities blockaded the region to prevent transport of pigs and other susceptible animals and their products, disposed of pigs, and carried out disinfections. An investigation team was sent to Heilongjiang. Authorities have pronounced the disease to be under "effective control" in Zhengzhou.

A spokesman from Zhengzhou's publicity office claimed to have no knowledge of the matter.

On August 15, authorities pronounced the disease to be under effective control in Shenyang after culling 8,116 pigs there. Authorities are paying 800 yuan per head in compensation for culled pigs.

At current market prices a 100-kg hog would be worth 1264 yuan in the northeastern provinces and 1391 yuan in eastern provinces. 

Tuesday, August 7, 2018

African Swine Fever's Great Leap to China

China reported its first outbreak of African Swine Fever last week despite over a decade of preparations to block the virus from entering the country. The virus appears to have made a vast intercontinental leap to Eastern China that parallels China's "Belt and Road," raising the possibility that China's new trade links may also create new vectors for the spread of disease.

On August 3 the Ministry of Agriculture and Rural Affairs announced China's first outbreak of African Swine Fever (ASF) on a farm on the outskirts of Shenyang in northeastern China. Officials said 47 pigs had died from suspected ASF infection on a 383-head pig farm in Shenyang's Shenbei New District. Officials announced they had culled over 900 pigs in the area to prevent spread of the disease. Yesterday--4 days after the outbreak--communist party news media declared that the ASF outbreak has been brought under control.

The virus is endemic in most African countries. It jumped to the Caucasus region in 2007 and has been spreading across western Russia, the Baltics, Belarus, Poland and the Czech Republic during recent years. Recent outbreaks had been reported thousands of miles from china--in Romania during June, and in Russia during July.
skinning a wild pig at a May 2018 training session on African Swine Fever prevention

Chinese officials have been on guard against the spread of ASF for many years. Two years ago, the Ministry of Agriculture's 2016-2020 plan for the swine industry warned of continuing risk of African Swine Fever spreading to China. In April 2017, the Ministry of Agriculture ordered provinces to be on high alert to prevent ASF from spreading to China. In October 2017 China's Ministry of Agriculture published an African Swine Fever emergency program notice instructing provinces to make preparations for dealing with an ASF outbreak.

Heilongjiang Province has been a focus of concern. Heilongjiang has a long Russian border and probably has China's largest population of wild pigs--a common vector of transmission. In May 2018, a technical training was held to teach officials along China's northeastern border how to detect ASF in wild pigs, investigate and control outbreaks. The training was held in Da Hing'an Ling district in the northern reaches of Heilongjiang Province and was attended by 50 workers from Inner Mongolia, Heilongjiang and Jilin Province.

Chinese authorities have focused ASF-prevention efforts on the southeastern corner of Heilongjiang Province that borders the tip of far eastern Russia that dips down to the port of Vladivostock:

It is puzzling why southeastern Heilongjiang is a focus of concern since Russian outbreaks--including the most recent on in Belgorod--were in western Russia thousands of miles from China. The closest cases were in Irkutsk in March 2017, still 1000 km west of China.

This week, after the Shenyang outbreak was discovered, investigators were sent back to a conservation district in Da Hing'an Ling in northern Heilongjiang (where the May 2018 training session was held) and to Gan'nan County in western Heilongjiang to check for signs of ASF.

This appears to be a farm to protect native breeds of pigs in a conservation area of Da Hing'an Ling, Heilongjiang Province, where an ASF monitoring investigation was conducted August 5-6, 2018.
While ASF may be under control in the area surrounding the farm near Shenyang, it seems probable that the virus is present elsewhere in China. The first announced occurrence of ASF in Liaoning Province was far from any international border and over 900 km from southeastern Heilongjiang where authorities have been watching for the disease. It seems probable ASF had been spreading for some time in China before it reached Liaoning Province.

How did ASF jump from eastern Europe to eastern China? A logical risk factor is China's "One Belt One Road" program which has been aggressively targeting new trade links with regions where ASF is present: Africa, eastern Europe, and Russia. These new trade routes also have the potential to create dangerous new vectors for the spread of disease. While China does not allow imports of livestock or meat from these countries, the virus or ticks that spread it could potentially tag along on clothing, commodities, equipment, or other materials transported from infected regions.

On August 3, China's customs administration issued an African Swine Fever alert ordering inspectors to inspect luggage, postal items, ships, airplanes and vehicles arriving from foreign regions infected with ASF and turn away or destroy any pigs, wild pigs or their products they find. But the alert was issued after the outbreak in China occurred--too late to prevent the virus from entering the country.

Chinese farms in Russia are another possible risk factor. The southeastern Mudanjiang district in Heilongjiang is also one of the most active regions in developing farming businesses across the border in Russia. With growing traffic of people, equipment, and commodities crossing the border in recent years there have been greater opportunities for viruses to spread.

Risk analysis is a good idea, but diseases tend to spread in unexpected ways. No one ever conclusively figured out how the PED virus apparently jumped from eastern China to the United States about 5 years ago. The results were devastating in the U.S. which has a lot of experience dealing with animal disease.

It is also inconvenient that China in the midst of a big project to shift swine production to northeastern provinces--which doesn't look like such a good idea now that the region is threatened with a highly contagious disease.

Sunday, August 5, 2018

Support Livestock Farms in Trade War: China Expert

Preventing impacts on meat production is the main concern regarding soybeans in the trade war with the United States, the former president of China Agriculture University said last week.

In an article issued by Farmers Daily, a Ministry of Agriculture-controlled paper, former Ag University President (and ag economist) Ke Bingsheng said China faces a choice of stopping soybean imports from the U.S. or continuing to import them after assessing a 25% tariff. If China were to stop buying U.S. soybeans, it would be left with a 10-to-20-million-ton deficit since other countries could not increase exports enough to replace U.S. soybeans. If China continues importing U.S. soybeans the imports will be more expensive due to the 25% tax, Professor Ke said. The tax would affect consumer prices by raising the cost of soybean meal which would, in turn, raise the price of meat, according to Prof. Ke. He said Chinese experts estimate the effect on China's CPI would be 0.1% and no more than 0.4%.

Prof. Ke said the main concern is how more expensive soybeans would affect meat production. Raising the price of soybean meal could reduce the inclination of farmers to raise pigs and chickens, causing the price of meat to rise. The article warned that a small change in production can cause large changes in price, citing an 8% decrease in pork production during 2006/07 that coincided with a 60% increase in pork price.

Prof. Ke suggested that authorities consider ways to support livestock producers in a way that offsets any rise in production cost due to higher soybean meal prices. This is needed to prevent a dip in production that could have reverberations for months or years through the "cobweb" hog cycle.

The article began with standard rhetoric about "no winners in a trade war" and asserted that U.S. tariffs are politically-motivated, not economically motivated and China had to respond in kind. It reviewed the rapid growth in soybean trade, the importance of China as importer and the U.S., Brazil, and Argentina as the main exporters.