Blog
How China's sick pigs might end up raising US QSR poultry prices
The bacon on your QSR's burgers or pork in your barbecue sandwich may soon be threatened by a virus half a world away.
August 15, 2019 by Andrew Rosenbloom — Director of Marketing, Consolidated Concepts
From ever-escalating labor costs, potential produce tariffs and a parade of other troublesome market conditions that are keeping QSR leaders tossing and turning in their sleep, pork price problems also loom large. As the source of everything from the bacon on all those burgers, to pork-based barbecue offerings, the world's largest pig herd in — you guessed it — China, is being dramatically affected not only by the U.S. trade war with China, but also by an epidemic of African Swine Fever that is plaguing Asian hog markets. And the resulting market mayhem may actually end up costing QSRs more for poultry in the future, some experts say.
The root of the problem: African Swine Fever
African Swine Fever (ASF) is a highly contagious viral disease in domestic and wild pigs, which is responsible for serious economic and production losses. The disease has wreaked havoc since it broke out in China. In fact, one-third of China's pig herd has been culled, though not before the disease spread elsewhere, mainly Vietnam.
Now to be clear, ASF is not a risk to human health. However, the highly contagious nature of the disease is such that any existence of the strain can take a serious toll on livestock health. Likewise, and perhaps just as important, is the fact that the virus may survive for several months in processed meat, leading to a situation in which all infected products or animals must be destroyed.
As it stands, more than 1 million pigs in China have been lost since the first ASF case was reported in August 2018. As a result of these conditions, Chinese pig production has dropped dramatically with live pig stocks down by 23% from May 2018 to May 2019.
China's reactions were rather swift as they set clear requirements for strengthening pig production and ASF controls, while regional governments set restrictions and encouraged activities and investments that would lead to safer production. Regretfully, a safe ASF vaccine is still being developed and experts estimate it may take two to three years to resettle the world's population of these animals. And perhaps more concerning is the fact that ASF incidents are no longer unique to Asian markets. In fact, on July 11, meat seized by U.K. authorities also tested positive for ASF.
How it all could affect U.S. QSRs
In other times, these worldwide pork market conditions might be a huge boon for U.S. pork producers. But current Chinese pork tariffs hamper trade for pork producers here, where the production of such meat is among the least costly, but highest quality in the world. But, Chinese tariffs change that picture and many believe European pork producers will instead benefit from more business with Asia, where pork consumption is among the highest on the planet.
The overall effect of this undoubtedly global pork production problem on restaurants is still unclear, but most analysts predict that protein prices are likely to rise for the second half of 2019 and into 2020. The pace of these increases will rely heavily on the conditions of trade deals as well as the expansion of the ASF outbreak into new regions.
It is anticipated that poultry will likely be the primary substitute for filling the gap in global pork demand. And that may end up causing an increase in those prices, if production is not or cannot be increased to meet the potential demand.
What can restaurants do to prepare for this possibility?
In large part, it's likely too late in the cycle of the ASF virus and its effects on the global pork market to lock in any contracted pork pricing. But restaurant leaders and supply chain managers might well be wise to begin targeting chicken contracts. It is, after all, entirely possible such measures taken now will allow QSR to more profitably add poultry to their menus in place of pork when and if the situation demands.
Photo: iStock
About Andrew Rosenbloom
Andy Rosenbloom is a foodservice professional who heads up the marketing team at the Buyers Edge Platform and its associated GPO brands, including Dining Alliance, Consolidated Concepts, Buyers Edge, FoodBAM and others. Andy’s insights come from a cross-section of the operators, distributors, manufacturers, service providers and trend-watchers.
