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China Urges Local Focus on Food Supplies, as Chinese Pork Market Dynamics Unfold

Bloomberg News reported on Tuesday that, “A statement from China’s government urging local authorities to ensure there was adequate food supply during the winter and encouraging people to stock up on some essentials prompted concerned talk online, with people linking it with the widening coronavirus outbreak, a forecast cold snap, or even rising tensions with Taiwan.

“The Ministry of Commerce urged local authorities to stabilize prices and ensure supplies of daily necessities including vegetables this winter and next spring, according to a statement Monday evening. Chinese households were also encouraged to stock up on a certain amount of daily necessities in preparation for the winter months or emergencies.”

The Bloomberg article indicated that, “The Monday statement told local commerce departments to coordinate more to improve local and inter-provincial supply chains for vegetables and also to strengthen monitoring of the prices of key staples such as vegetables and meat.”

Also Tuesday, New York Times writer Alexandra Stevenson reported that, “Extreme weather events in recent months, including flooding, have ruined crops and disrupted food chain supplies in parts of [China, Pan Chenjun, an agriculture analyst at the Dutch lender Rabobank] added.

“As a consequence, the cost of certain foods, such as vegetables, has soared. Some vegetables, like spinach, have doubled in price, in some cases costing as much as meat does, according to one local report.”

And Bloomberg’s Rosalind Mathieson provided additional context on food security and China this week, explaining that, “Famines have hit China for centuries, and are often weather related. But there are also memories of Mao Zedong’s ‘Great Leap Forward’ — an aggressive push to become an industrial power that caused widespread hunger in the late 1950s. Tens of millions are estimated to have died from starvation.

“China is in no way on the cusp of a disaster of that magnitude. But leaders know they need to keep citizens warm and fed, especially as they face further pandemic lockdowns. The party keeps a careful watch on anything that could trigger social unrest, especially as it heads into a cycle of crucial leadership meetings.

“So it’s interesting to see the Commerce Ministry, as Covid cases flare and power shortages hit factories, urging local authorities to ensure adequate food supplies and encouraging people to stockpile essentials. Wholesale vegetable prices have soared — costing more than meat in some cases — after floods in key production regions.”

In other developments related to Chinese food and agricultural variables, Reuters News reported on Monday that, “Chinese researchers say they have found a way to produce an animal feed protein from carbon monoxide in what is being hailed as a breakthrough that could help reduce the country’s reliance on huge volumes of imported soybeans.

“China is by far the world’s top buyer of soybeans, bringing in around 100 million tonnes a year to turn into protein-rich feed for its huge livestock sector.

A portion of those beans could one day by replaced by synthetically made protein, however.

The Reuters article noted that, “At least 10 other start-ups around the world are also using synthetic biology to create animal feed, using waste gases as a feedstock for bacteria or other protein-rich microorganmisms.”

Also this week, Reuters writer Dominique Patton reported that, “China’s huge hog sector is struggling with excess production after millions of small, often first-time, pig farmers entered the industry to capitalise on record profits during a swine-fever related shortage.

“Now, even as prices hover below the cost of production and the government urges them to cull their herds, many of the newcomers are reluctant to give up, dimming hopes for the market returning to balance.”

The Reuters article noted that, “Profits initially boomed in line with higher prices for pork, the country’s favourite meat. But surging output and COVID-linked demand interruptions have driven down prices by 70% this year, causing heavy producer losses over the past three months.”

Ms. Patton pointed out that, “More than 2 million small farmers entered the sector last year, according to official data, joining an estimated 20 million small-scale pig producers, while some 16,000 new large-scale farms also began operating.

“‘The current market is caused by millions of farmers’ speculative behaviour towards the African swine fever-related price expectation,’ said Pan Chenjun, senior analyst at Rabobank.

“With a bigger breeding herd now than before African swine fever struck, government officials last month issued a rare instruction to farmers to eliminate their less efficient sows.”

Recall also that Wall Street Journal writer Jacky Wong reported last week that, “The swine fever outbreak [in China] actually probably helped to accelerate consolidation in the industry since smaller farms are less able to invest in biosecurity measures. In fact, the number of the smallest farms had already dropped two-thirds from 2009 to 2019. Farms that produce 50,000 pigs or more nearly quadrupled over the same period.”