In depth: Chinese pork imports remain in the shadow of 2016
While still well above 2015 levels, the Chinese pork import market has fallen behind the exceptional performance of 2016 in recent months. With China the largest single country pork importer, what might this mean for the UK and global pork market?
In Q3, shipments of fresh/frozen pork were down a substantial 50% on year earlier levels, at 258,000 tonnes. Virtually all suppliers were affected, with German shipments in particular declining 63%. This meant Spain became the largest single country supplier, though its shipments were still around a third less than during the same period last year. Even the UK shipped a modest 1% less according to Chinese customs; despite UK pork exports to China still recording year-on-year growth in the available HMRC July and August data.
Chinese pig offal imports were also affected by the decline in demand, and fell 18% on 2016 levels during Q3, to 291,000 tonnes. Most of this decline was driven by fewer shipments from the US and Germany.
Some recovery in domestic production is thought to be causing imports to fall below the exceptional levels of 2016. This is despite the Chinese government reporting sow numbers to be behind year earlier levels throughout this year. The latest USDA forecasts also anticipate a 3% year-on-year decline in pig numbers for the beginning of 2018. Increasing consolidation is expected to be improving the efficiency of production, therefore enabling output to rise. The latest USDA forecasts anticipate Chinese pork production will rise both this year (+ 0.5 million tonnes) and next (+ 1.2 million tonnes).
Compounding the increasing production, consumer demand is thought to be stagnating. While a modest increase (+2%) is anticipated in 2018, reflecting increasing supply and urbanisation, consumption in cities is thought to be saturated. Middle class urban consumers are reportedly switching away from pork towards beef, lamb, and seafood. Hence, pork’s market share is expected to decline moving forwards.
Altogether, the largely stagnant consumption and rising domestic production is expected to translate into lower imports. In particular, increasing domestic production is expected to put further pressure on the Chinese pork price, increasing its price competitiveness compared with imported alternatives.
As such, the latest USDA forecasts anticipate a 24% year-on-year decline in Chinese pork imports for 2017, and a further 3% decline in 2018. Shipments for the year to date currently stand 28% behind year earlier levels, which suggests there may be some stabilisation of volumes in the final quarter. However, this is not expected to continue into 2018. A temporary oversupply on the market is anticipated early next year, with some farm closures in restricted areas now required by the end of 2017. This will result in pigs that cannot be relocated being slaughtered, temporarily further boosting domestic supplies on the market.
These developments could prove particularly challenging for the EU pork market, which supplies two thirds of China’s pork imports. This could especially be the case as US production expands, which may increase competition for market space. Nonetheless, for UK exports, prospects may be more favourable considering the UK has been noticeably less affected by the downturn in the Chinese market so far this year.
Bethan Wilkins, Analyst
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