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A Fortune from Misfortune: Evidence from Hog Firms' Stock Price Responses to China's African Swine Fever Outbreaks

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Abstract

China is the world's largest hog producer and a leading pork importer. Since August 2018, ongoing outbreaks of African Swine Fever (ASF), a highly contagious and deadly disease affecting pigs, have hit China's livestock industries and wiped out 40% of China's pigs. We leverage data on daily stock returns from 25 major publicly listed firms from China and eight major pork-exporting countries to provide the first systematic analysis of the firm-level economic impacts of the outbreaks. We find that, on average, announcements of ASF outbreaks have led to positive and significant stock returns for both Chinese and international hog firms. China's hog firms, on average, enjoyed 10%-40% cumulative abnormal returns during the 2019 Chinese Spring Festival, when investors saw signs of a near-20% inventory loss during a peak demand season for pork. We show that larger hog firms tend to capture greater positive stock returns. Our results suggest opportunities for consolidation, expansion, and upgrades of China's meat industry that have long-run implications for its global competitiveness and efficiency.

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  • Tao Xiong & Wendong Zhang & Chen-Ti Chen, 2021. "A Fortune from Misfortune: Evidence from Hog Firms' Stock Price Responses to China's African Swine Fever Outbreaks," Center for Agricultural and Rural Development (CARD) Publications 20-wp602, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    • Handle: RePEc:ias:cpaper:20-wp602
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    2. Chen-Ti Chen & John M. Crespi & Yongjie Ji, 2021. "The United States' Competitive Positions in Beef, Corn, Pork, Soy, and Wheat Exports: 1980-2019," Center for Agricultural and Rural Development (CARD) Publications apr-winter-2021-3, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    3. Yulong Chen & Liyuan Ma & Peter F. Orazem, 2021. "Minimum Wages and Rural and Urban Firm Entry and Exit," Center for Agricultural and Rural Development (CARD) Publications apr-winter-2021-4, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    4. Chad Hart & Lee L. Schulz, 2021. "USDA Outlook for 2021 Shows Healthy Recovery," Center for Agricultural and Rural Development (CARD) Publications apr-winter-2021-5, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    5. GianCarlo Moschini & Yongjie Ji & Seungki Lee, 2021. "Corn Yields and Climate Change: The Innovation Challenge," Center for Agricultural and Rural Development (CARD) Publications apr-winter-2021-1, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    6. Tao Xiong & Wendong Zhang & Fangxiao Zhao, 2023. "When China strikes: Quantifying Australian companies' stock price responses to China's trade restrictions," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 67(4), pages 636-671, October.
    7. Xi He & Dermot J. Hayes & Wendong Zhang, 2021. "Is China's Hog Rebuilding Complete? Reconciling Inventory and Price Data," Center for Agricultural and Rural Development (CARD) Publications apr-winter-2021-2, Center for Agricultural and Rural Development (CARD) at Iowa State University.

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    JEL classification:

    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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