FILE PHOTO: A butcher arranges pieces of sausage at his shop in Marseille, France
PARIS (Reuters) - French deli meats makers are being squeezed by a surge in pork prices linked to an African swine fever epidemic that has decimated the pig herd in China, they said on Thursday, warning of potential bankruptcies in the sector.
African swine fever, a highly contagious virus, has spread to every province on the Chinese mainland since August last year, killing millions of animals and prompting China - the world's biggest pork producer - to turn to imports earlier this year.
In a knock-on effect, French live pork prices have gained 24% since early March, with a rise of as much as 30% for some ingredients used in making deli meats like saucisson, cooked ham and dry-cured ham, making it hard for producers to pass such price rises on to clients, industry association FICT said.
"These price increases penalise our industries because commercial deals were signed earlier, based on historically low prices, and we now have to convince clients to accept the price rise," FICT Chairman Bernard Vallat told reporters.
France vies with the Netherlands for the title of third-largest cold meats producer after Spain and Germany.
Deals between suppliers and retailers are negotiated once a year in France and close at the end of February. Buyers are not bound to accept price rises after that without a special clause written into the contract.
Vallat warned of bankruptcies if price hikes could not be passed on to buyers.
"No company can survive if there is no rebalancing with buyers," he said, adding that it was almost certain prices would continue to rise.
Around 30% of French deli meats makers were already making losses in 2017 due to a rise in commodity prices and that share is likely to remain stable in 2018, Vallat said.
"We expect that (the crisis) will last because the situation is not under control in China and it will take time to reconstitute stocks," said Vallat, who was previously head of the World Organisation for Animal Health OIE.
Average European Union pigmeat prices rose 21.9% since last year, with a sharp rise recorded since early March, EU official data released on Thursday showed.
EU pigmeat exports to China jumped 25.9% in the first three months of 2019 compared to the same period a year earlier, the data also showed.
(Reporting by Sybille de La Hamaide, editing by Deepa Babington)