Chinese pig prices reach record highs
Chinese live pig prices have continued to move up this month, reaching a record high of ¥20.92/kg (£2.46/kg) in the week ended 15 August. The price has gained around ¥2 (+13%) since the start of August alone.
At wholesale level, pork prices are also elevated and currently average over ¥32/kg (£3.64/kg). This is a level similar to both the 2011 and 2016 peaks. These prices have increased even more sharply since the start of the month, gaining ¥8 (+32%)
The rapid rise indicates that the pork supply deficit is becoming more critical. The latest official figures suggest the annual decline in the pig herd had reached 32% by July. Rabobank expects this to reach 50% by the end of the year. Pork meat output is still expected to fall by 25%, as herd liquidation supports supply levels.
Although frozen stock levels have reportedly been high, the current high price levels suggest these stocks will now be drawn down. Ultimately, import demand should now increase further. The lack of supply also means there is scope for further price increases.
Despite this tight supply situation, China announced it will further increase tariffs on pork imports from the US at the start of September. An additional 10% tariff will push the total tariff payable on US imports up to 72%.
However, considering the current elevated level of Chinese pork prices, some US product will probably still be price competitive. In June, the US was selling pork to China with an average price of ¥14.51/kg. Even with an additional 72% on top of that, this price would still be lower than the current domestic price level.
The US is of course still disadvantaged by this tariff, and with Canadian suppliers currently suspended, the outlook for EU exporters looking to supply the Chinese market is positive. With supplies relatively constrained in Europe this year, a growing export demand looks set to support the EU market. Brazil is also expected to increasingly focus on the Chinese market as opportunities increase later this year.