Swine Flu Has Little Impact on China Pork Demand, Zhongpin Says

By Richard Dobson

May 7 (Bloomberg) -- Pork demand in China, the world’s largest producer and consumer, will be largely unaffected by swine flu in the long term and prices are likely to rebound in the third quarter, an executive from Zhongpin Inc. said.

“We did see a dip in both pork prices and demand in the first week” after the news of the outbreak appeared in the Chinese media, Ben Baoke, executive vice president at China’s fourth-largest pork producer, said yesterday. “Yet both demand and prices have recovered to levels prior to the outbreak.”

Hog futures in Chicago jumped 5.2 percent in the last two sessions on speculation that demand will rebound after the outbreak of swine flu drove the price of the meat down. China is battling to keep the virus from entering its borders after it infected 1,658 patients in 23 countries, killing 30 people.

“China’s pork consumption won’t see much decline, mainly because consumers are unlikely to change their diet,” Tian Feng, an analyst at BOC International (China) Ltd., said by phone from Shanghai. “The initial fear of eating pork has also dissipated now that they know the virus has little to do with pigs.”

No cases of swine flu, formally known as influenza H1N1, have been confirmed in humans in China. There also hasn’t been any mutated strains found among its pigs, Gao Hongbin, the vice agricultural minister, said April 30 in Beijing.

‘Prices Stabilizing’

“We’ve started to see signs of pork prices stabilizing in the past month and I think there’s a possibility prices will start to climb in the third quarter,” Ben said in an interview. China consumed about 43 million metric tons of pork and pork products last year, Ben said. The consumption this year “will not decline from the 2008 level,” he said.

Chinese consumers realize they will not contract the virus by eating pork, Ben added.

Still, Yao Minpu, vice chairman of Charoen Pokphand’s China subsidiary was quoted by the 21st Century Herald on May 5 saying that swine flu may reduce China’s pork consumption by as much as 20 percent.

Pork prices in China “have been on the decline since the fourth quarter last year despite a small rebound during the Lunar New Year holiday in January this year,” Ben said.

Meat prices may rise from the current “historically-low” level as pork remains the primary source of protein for the Chinese population, the world’s largest, and the government may boost prices by stockpiling the meat, he added.

Hog futures for June settlement rose 3.6 percent to 67.1 cents a pound on the Chicago Mercantile Exchange yesterday. Futures are still down about 7 percent since April 23, after the first reports of the flu in Mexico.

‘Hard Times’

“Hog farms in China are having a hard time as some are struggling to breakeven while others started to suffer losses,” Ben said. China’s economy grew at the slowest pace in almost 10 years in the first quarter, forcing many as 30 million rural migrant workers out of jobs.

The government is watching the market situation to assess the possibility of stockpiling, Ben said. It will start considering stockpiling the meat if live hog prices fall to below 5.5 times the cost of corn, a major ingredient in animal feed, he said. The ratio is currently around that level, he said. The government has yet to begin stockpiling.

Zhongpin is one of the companies the government might select to stockpile meat as the company has up to 20,000 tons of spare refrigerated warehouse capacity, he said. The company slaughtered 2.5 million pigs last year and produced about 240,000 tons of pork and pork products, he added.

To contact the reporter on this story: Richard Dobson in Shanghai at rdobson4@bloomberg.net