African swine flu which has led to death of herds of pigs in farms across China has led to surge in pork prices and can drive up inflation of the product in several emerging markets say market watchers. Outbreaks of this flu have been witnessed in China, Japan, Australia, Poland, and South-East Asia and as far away as Russia. The Chinese government had announced in April that it has already culled more than a million pigs to control the outbreak but experts like TS Lombard estimate that actual number of animals killed could be close to a 100 million.
Experts from Capital Economics believe that these large numbers can lead to high inflation and if the disease spreads to other nations it can lead to greater inflation in several parts of Asia and Eastern Europe. In nations like Cambodia, Taiwan, Vietnam, Russia, Romania and Poland the pinch is likely to be felt the hardest as pork is a relatively large part of their diet and contributes to 2 % of their consumer price index. Though in some emerging markets it is just 1 % in China it makes up 3.5 % of its consumer index.
China’s National Bureau of Statistics shows that food prices in the country shot up by 7.7 % in May when compared to same period last year as prices of pork shot up by 18.2 %. The inflation in China is likely to go higher while consumer prices in emerging markets could rise by 0.3 % if pork prices rise up by 15 %. The reduction in pig populations due to mass culling can directly lead to downfall in demand for soybeans which is prime diet of pigs. Now the big risk for farmers in emerging markets would be permanent decline in demand for oilseeds from China as people shift to other meats from pork due to rising prices.