The Trade War Is Keeping U.S. Pork Producers From Capitalizing on China’s Pig Crisis

This post was originally published on this site

Since African Swine Fever first started tearing through China in August 2018, the country’s pig population has been cut in half, and there are few signs the disease will be stopped soon.

The crisis—while devastating to China—represents a huge opportunity for U.S. pork producers, but it’s an opportunity that remains untapped due to trade war restrictions. Now U.S. suppliers hope upcoming U.S.-China talks—set to resume on Oct. 10—will resolve the conflict and finally open the Chinese market back up.

“American pork producers would like (the trade war) to go away because they think this can be one of the great economic booms of our business,” says Steve Meyer, an economist focusing on U.S. pork production with the Iowa-based Kerns and Associates.

Since its introduction to China, African Swine Fever has resulted in a 25% reduction in pork production, according to Dutch lender Rabobank. The disease has spread to hog populations around the world and experts warn the problem could get much worse. Edgar Wayne Johnson, a senior technical consultant with Enable Ag-Tech Consulting, estimates that 60% to 70% of sows (adult female pigs) in China have died from African Swine Fever and the disease is still spreading.

“People who have looked at it have said China will not be rid of this disease in 100 years,” Johnson said.

Though the disease does not impact humans—even to those who consume the meat—it is highly contagious and extremely lethal to pigs.

A missed opportunity

For U.S. pork producers—who have thus far been insulated from African Swine Fever—such a dip in Chinese production should have been a boon, given that China accounts for roughly half of global pork consumption and production, according to an April U.S. Department of Agriculture report.

U.S. pork producers, however, have largely missed out on the growing opportunity to export to China because the crippling effects of the disease have coincided with the U.S.-China trade war. Successive rounds of tariffs over the past year or so mean that U.S. pork producers face a 72% tax to enter the Chinese market, compared to 12% imposed on other global competitors.

As a result, pork producers in the U.S. can only hope a reconciliation of the trade spat will reduce tariffs and give them a chance to be more competitive in exporting their products to Chinese consumers.

“China is the number one thing on (pork producers’) minds,” says Meyer.

Pricey pork

On Oct. 1, China will celebrate its 70th anniversary and among the military parades, celebrations, and trips home for the weeklong holiday, the country will consume a lot of pork.

Reduced supplies from African Swine Fever, however, have sent pork prices skyrocketing across the country, to the point of becoming a joke on Chinese social media (though it seems government censors have scrubbed many of the references). In one video that still remains, a healthy village pig is shown strutting down the street in a way that suggests it is far more valuable than before.

To stabilize prices for the holiday, the Chinese government has recently auctioned off warehouses full of stockpiled pork reserves. Yet it is only a temporary solution to a Swine Fever problem that will take years—or even decades—to resolve.

The Chinese government already has culled millions of pigs, instituted new biosecurity measures, and ramped up efforts to find a vaccine for the fever, which currently does not exist.

Meyer estimates that China could resolve its pork crisis within “a year or two” with the right vaccine. But he expressed skepticism such a vaccine will be discovered any time soon. Johnson, on the other hand, says a vaccine is likely to be released soon, but that it won’t necessarily provide a cure.

“There is this idea that if you vaccinate you will create a magical bubble around these pigs and they are not going to get it,” Johnson said. “That’s actually not the way vaccines work. The vaccines will help them survive, but then we’ll see more chronic forms of [the disease].”

Sowing optimism

All the while, U.S. pork producers stand to lose millions more dollars in potential business if the U.S.-China trade war continues. Yet producers have several reasons to be optimistic.

Pork industry representatives joined President Donald Trump in signing a trade deal with Japan on Wednesday, which will reduce the cost of exporting pork to that nation.

A few weeks ago, China also provided some relief, announcing it would not impose additional tariffs on U.S. pork and other commodities in the run-up to October trade talks.

The U.S. National Pork Producers Council called the move an “apparent gesture of goodwill by the Chinese” that could lead to “more sales of U.S. pork” and contribute “to a resolution of U.S.-China trade restrictions.”

More must-read stories from Fortune:

—The London Stock Exchange snubbed Hong Kong’s first buyout bid, but the fight isn’t over
—Andrew Yang’s universal basic income plan has already gotten a test run—in Italy
—How ex-Nissan CEO Carlos Ghosn hid $140 million of his compensation
China’s Tesla has already lost $5 billion and now it’s fighting for its survival
—Listen to our audio briefing, Fortune 500 Daily
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.