Dead Pigs, Ducks And Now Black Swans: China's Animal Apocalypse Crosses Into The Twilight Zone

http://www.zerohedge.com/news/2013-03-28/dead-pigs-ducks-and-now-black-swans-chinas-animal-apocalypse-crosses-twilight-zone


Dead Pigs, Ducks And Now Black Swans: China's Animal Apocalypse Crosses Into The Twilight Zone
Tyler Durden's picture
Submitted by Tyler Durden on 03/28/2013 20:16 -0400


First it was thousands of dead pigs floating in the Shanghai water supply (at last estimate over 16,000), then a thousand dead ducks were pulled from a river in the Sichuan province, and now, pushing the meme beyond even its most grotesque boundaries, we learn that five black swans were found floating lifeless on the pond of Anhui University’s old campus in Hefei, traditionally inhabited by a bevy of black swans. From Danwei: "The latest instance of floating dead animals in China – first pigs, then ducks, and now black swans – these mere five black swans became an object of heated discussion on the Internet right after the announcement was made. How did they die? Was it a natural disaster or another man-made one? As Star News tells us today, upon hearing of the news yesterday it immediately sent a journalist to the scene to find out exactly what happened. What he found was just one more filthy pond filled with oily water and garbage."

Ok, maybe there is no deep symbolism mystery to this latest black aflocalypse, which may be explained simply by unprecedented local pollution, unless of course many more "fat tails" continue keeling over in a very literal sense.

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However, just when it appeared safe to discard the latest media reports of mass animal aquatic burials, an odd wrinkle appears, one which may tie the proverbial animal apocalypse room together.

Recall that as we have discussed repeatedly, the biggest bogeyman facing China is the importation of blistering hot money sourced by Bernanke and his printing brethren. While China may (or may not) be able to temper real estate inflation which has been the preferred target of inbound capital, the one place the Politburo certainly can not afford a price surge is in the cost of its most popular food product: pork. Should this key diet staple become unaffordable to the hundreds of millions of domestic consumers, the Arab Spring would seem like a balmy walk in the park inside a gated community. Which means that no matter what, the price of pork (and to a smaller extent soy) has to be kept as low as possible, especially with the upcoming delayed aftereffects of last summer's US corn drought which led to a mass liquidation of animals, especially pigs. Recall from last September that "The "mass liquidation" of animals - which Rabobank said will pick up pace in the beginning of 2013 - will contribute to food prices hitting new highs. The cost of pork is expected to rise at the fastest pace - by 31% by the end of June next year." Algos may have forgotten about this very key fact, but China sure hasn't.

So what are the Chinese behind the scenes powers doing about this potentially massive problem? Ironically, they may just be those responsible for the mass pig slayings witnessed in recent weeks. From Wantchinatimes:

The recent incident in which thousands of dead pigs were found floating in Shanghai's main river has further hit pork prices in China, with the sector already experiencing falling demand, according to local media reports.



Weekly data from the country's Ministry of Commerce released on March 20 showed that wholesale prices of pork has fallen for four consecutive weeks as of March 17, with the accumulated decline over the period touching 8%.



Pork prices in the country were undergoing a seasonal decline after Chinese New Year, but the recent scandal has rotted demand, Chinese business news site Caixin said.



Even United States Treasury secretary Jacob Lew ordered vegetarian dumplings instead of dumplings stuffed with pork when he dined out during his recent visit to China.



The Chinese government's guidelines on official conduct, including the restrictions imposed on holding official banquets, is another factor affecting pork demand, driving down prices to levels resembling a crash, Caixin said.



Figures posted by industry information website Soozhu showed that average hog prices dropped to 12.5 yuan (US$2) a kilogram on March 19, and the pace of its decline touched a near-decade high.



The National Development and Reform Commission, China's economic planner, said it is closely monitoring pork prices and would intervene if the market downturn persists.



E-commerce giant Alibaba's website covering the agricultural sector said pork has seen three market cycles during the past decade, with each cycle becoming shorter and price fluctuations becoming steeper.



Pig farmers began expanding capacity two years ago when pork prices surged, leading to the current situation of excess supply, local reports said.

Crush prices through revulsion about potentially spoiled meat? Not a bad plan, and one which so far may have worked. However, how long before the mean reversion wave sets in, and the deferred consumption of pork comes back with a vengeance? What happens when the artificial reduction of pig supply leads to a surge in prices once demand goes back to normal as the locals forget all about the recent floating pigs?