Chinese pig prices moving up- a second wind in import growth expected
Chinese pig prices have returned to an upward trend since June.
By the middle of July, live pig prices across the country averaged nearly CNY 18/kg (209p/kg), 20% higher than the end of May and 47% higher than year-earlier levels. This is still a little behind the record highs achieved in 2016 though.
The price increase indicates that supplies are becoming tighter. This reflects a decline in the pig inventory, which was reported as 26% lower than year-earlier levels in June. Some estimates suggest the decline may be even larger than this, with Rabobank estimating 40% of the herd has been lost. Reports suggest some small-scale producers have attempted to restock, which might mitigate some of the herd losses. However, in reality, with ASF still prevalent, these efforts are unlikely to be successful.
The rising prices represent a step-change in the Chinese ASF situation. Up to now, pig price rises had been limited, suggesting any decline in production was matched by falling demand. Reports suggest that consumers have been switching away from pork in response to (unfounded) safety concerns. Equally, large-scale culling of pigs early in the year means supplies were not as low as they might have been, and some pork has been withdrawn from storage. For 2019 overall, production is still expected to fall significantly though. The latest estimates from Rabobank and the USDA attaché suggest a year-on-year decline of 11-25%. Further declines are expected next year.
While pig meat and offal imports may have been sluggish early in the year, volumes were a third higher than last year in Q2, totalling 762,300 tonnes. All suppliers increased shipments, even the US (+10%), despite the additional tariffs remaining in place.
Some of this increase reflects Chinese speculators purchasing pork in anticipation of rising Chinese pork prices. However, Chinese prices did not rise quite as soon as some expected, and reports suggest this trade has slowed more recently. With prices now on the rise though, import growth is expected to strengthen again, especially in the peak demand period at the end of the year.