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Coronavirus Pushes China’s Food Chain toward Modernization

Price pressures on the most perishable animal products highlight the need for an updated supply chain.

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Coronavirus Pushes China’s Food Chain toward Modernization
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China’s novel coronavirus outbreak has disrupted the county’s food supplies and affected prices of key animal products.

The virus, which rapidly spread from an outdoor market selling live animals and fresh meat in Wuhan province, has prompted Chinese authorities to take sweeping quarantine measures to contain its spread. These efforts include the temporary shuttering of restaurants and fresh food markets, as well as travel restrictions that have affected meat transportation, slaughtering and processing operations.

These developments underscore the need for the country to transform its food value chain away from open-air markets and toward a cold-chain model that keeps perishable items fresher for longer.

The poultry and egg segments, which represent 20% to 30% of China’s total protein consumption, have faced strong downward price pressure. Weeks into the outbreak, live poultry prices fell 5% to 10%, while egg prices plunged more than 20%. This partly reflects the short life cycles of chickens and minimal shelf life of eggs, prompting producers to sell off their available stocks.

Wholesale prices for pork, a staple of the Chinese diet that makes up 40% to 50% of the country’s protein consumption, rose around 10%. That hike comes on top of already high prices due to the 2018–19 African swine fever outbreak, which led to the mass culling of pig stocks. Still, the Chinese government has mitigated more severe shortages during the coronavirus outbreak by releasing reserves of frozen pork into the market and allowing some pork producers to resume work after implementing protective measures against the spread of coronavirus.

Prices for beef and lamb have been relatively unaffected, as they represent just 5% to 15% of total protein consumption.

The authors would like to thank Yue Chen, Josh Zhu and Rock Zhang for their contributions.

Thomas Luedi and Helen Liu are Bain & Company partners based in Shanghai.

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