[UPDATED: Feb. 11, 2020]
When SARS hit back in 2003, China was nowhere near the economic powerhouse it is today. Now, if something happens to China, the entire world is affected, and the food sector is not immune to any shifts. Even though the outbreak is starting to slow, the economic damage will easily surpass those of SARS, and the effects are being felt right here in Canada.
China is a consumer-driven economy now, much more so than in 2003. As a result, China accounts for a much larger share of commodities demand now, relative to 2003. Most futures such as cattle, hogs, and soybeans have dropped anywhere between 10 per cent to 30 per cent in the last few weeks. In recent years, commodities such as coffee have been under pressure to supply China in recent years. China’s imports have more than tripled in the past decade. With the emergence of this virus, however, imports have dropped significantly. Shipments for lobsters and other products have all but halted now as a result of the outbreak. This shift may signify cheaper prices in many parts of the world, but certainly not in China.
China is essentially buying less of everything, making its population more vulnerable. Reports suggest the food inflation rate has exceeded 100 per cent in some areas. Chinese authorities are trying to get food to places where it’s needed, but it’s been challenging.
On our end, some retail-level food prices could drop. In months to come, it’s possible that we may see lowered prices for some products like beef, pork, and coffee, depending on how grocers manage margins. Some bargains could be on the way, but it won’t last.
Observers still caution that the full economic fallout depends on how well China can ultimately contain the outbreak. And when they do, China will be back, buying everything it can. Considering the new trade truce with the United States, China could be buying American goods at an historical pace. Once this happens, we could see commodity prices soar across the board. Such a swing could impact prices here in Canada too. Once the outbreak is contained and China gets back to work, we could see yet another magmatic economic shift in the global economy, but in reverse. Futures are telling us that markets are expecting such a recovery to happen as soon as April or May. If that occurs, food inflation in Canada could become an issue by the end of spring or perhaps early summer. The big question most analysts are asking is how long until the outbreak will be contained.
We are seeing encouraging signs; even if the number of deaths in China surpasses the toll from SARS, the number of cases reported every day seems to indicate that the situation may be under control. It’s still too early to succumb to irrational optimism, though, as there is much we still don’t know about the coronavirus. As with SARS, scientists now believe that contact with live animals or slaughtered animals’ flesh may be the cause of the disease. In fact, some reports suggest the spread of the coronavirus may occur through eating meat. This could become yet another blow to the livestock industry, which is the last thing they need right now. Activists may potentially use this outbreak as a new argument to encourage consumers to move away from meat products. But the reality is this: biosecurity measures in the country, especially in central China, are questionable at best. China is not known to be forthcoming with reliable, verified data related to food safety and public health. Perceptions are impacted by what we know, but not knowing enough can also be problematic.
But the death of Dr. Li Wenliang, whose warnings about the coronavirus were quietened, just made things worse. He has become the new potent symbol of Beijing’s failures to disclosure and offer transparency. A similar pattern was seen with SARS in 2003. In 2008, thousands of infants were exposed for months to contaminated milk formula, but Beijing opted to turn a blind eye simply because it was hosting the Olympic Games and did not want the distraction. The scandal involved infant formula tainted with melamine. Melamine! As a result, 54,000 babies were hospitalized, and six died. Many of these cases could have been prevented if Beijing had acted more quickly. Regrettably, based on what happened to Li Wenliang, nothing has changed.
What is happening with the coronavirus could indicate how the African swine fever (ASF) is being dealt with, in China. Even though ASF is solely an animal disease affecting China,Asia and parts of Europe right now, skepticism about what is happening in China with ASF may grow. Many believe it could come to Canada soon. There are no associated risks for humans who come into contact with ASF, but Canadian officials could find it difficult to communicate risks when data coming out of China is anything but reliable.*
Humanity goes through a global outbreak like this every 15 years or so, and given China’s topography and demographic reality, there is a chance the country will be the epicentre of many other outbreaks in the future. The coronavirus is a new installment of global human diseases that remind us of how vulnerable we all are. China has its ways, whether we agree with them or not, but its responsibilities go far beyond its borders, from an economic and public health perspective. This recent setback in transparency is yet another indication that China has not fully accepted its place as a major socio-economic player around the globe; with more economic clout comes more responsibility.
Before ASF gets to Canada, let’s hope China opts not to suppress any information that can help us contain risks.
*UPDATE: This paragraph was corrected to state that ASF is not only affecting China and Asia, but also parts of Europe, and to clarify that people cannot contract ASF.