Poultry Prices and China’s African Swine Fever

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on Aug 26, 2019 1:41:38 PM
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Those in the restaurant industry have been keeping a watchful eye on the effects that global challenges such as tariffs and disease may be having on the U.S. markets. One item that has been of critical concern is pork and the increasing demand that has developed due to China’s African Swine Fever. This epidemic may have an effect not only on our pork prices, but also on poultry and other protein alternatives.

African Swine Fever

It started just about one year ago—on August 3, 2018 the first case of African Swine Fever (ASF), nicknamed “pig ebola,” was reported in China. Since that time, about 1,170,000 pigs have been culled in an attempt to stop the epidemic of this highly contagious and lethal virus. It is estimated that, by the end of 2019, over 300 million pigs will have died—approximately a quarter of the world’s pork supply. Unfortunately, it appears to be spreading. Approximately 62 provinces/cities in Viet Nam have reported outbreaks with more than 4 million pigs being affected. North Korea and Cambodia are reporting outbreaks as well. On July 11, port authorities seized meat in Northern Ireland that tested positive for ASF, becoming the first time that the fever has been detected in the United Kingdom.

According to Fortune, the five big export/import markets which includes China, U.S., European Union, Canada and Brazil, have jumped by more than 20 percent since December, 2018. In China, pork prices have increased by more than 40 percent while prices in the U.S. have remained steady but are expected to rise.

So, just what does this have to do with chickens?

The Cost of Poultry

Countries around the globe are looking for an alternative protein and many consider poultry a primary substitute. In fact, poultry prices have already begun to climb in areas affected by the virus. While China has banned the export of U.S. poultry since the outbreak of the avian influenza in 2015, other countries around the world will be reacting to the shortage, creating a higher demand and an increase in prices. Even turkey prices may be affected, particularly as the holiday nears, when the public turns to this large game bird should the price of ham rise.

Some even believe that China’s growing need for alternative protein may result in the U.S. re-entering their market for the first time in more than four years.

The long-term effects of this epidemic are likely to be evident for years. Despite China’s rapid response to the crisis, once eradicated, it will take about 20 months for China to return to pre-ASF production levels.

Restaurants Looking to the Future

For those businesses that are directly impacted by these types of occurrences, now may be a good time to look to the future. While the devastation centering around the pork market has not had the anticipated effect on cost, understanding the trickle-down effects on other types of protein may prompt buyers to start taking a look at both poultry and beef contracts. Adapting one’s menu based on expected market pricing is also advised during animal disease outbreaks that may have a long-term effect.

According to the Farmer’s Report—Market Trends 8.23.2019, small bird supply and demand is still out of balance and, as a result, pushing pricing higher as demand outpaces supply.

Many of you probably remember the great chicken wing shortage of 2017 when prices jumped from $1.50 to /$2.09 per pound and restaurants that centered their business around this staple began pushing the boneless version. This is a prime example of the benefits of being prepared and keeping a wary eye on the horizon when it comes to a volatile market.

Gaining an upper hand on foreseeable market changes allows restaurants to develop a plan instead of finding themselves scrambling at the last minute. As E. Goldratt so eloquently stated, “Good luck is when opportunity meets preparation, while bad luck is when lack of preparation meets reality.”

Learn About: Supply Chain Assessments 

  

Topics: Cost Reduction, food safety, Foodborne illness, food costs, Supply Chain

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