How is China influencing global pig prices?
Pig prices in both Europe and the US started to climb sharply in March, following a reported 20% drop in Chinese sow numbers as African Swine Fever takes hold. However, the market reaction has slowed in recent weeks.
Chinese demand for imported pork, both real and anticipated, has clearly increased in the past two months. Indeed the latest EU export figures show an escalation in shipments. At the same time, reports suggest slaughter pig numbers have been tightening in Europe, lending further support to prices.
The situation is less straightforward in the US. While the USDA has recorded substantial weekly pork sales to China, these volumes have not yet been reflected in actual shipments recorded by US customs. There had been optimism that US-China trade negotiations would result in the removal of the additional 50% tariff on US pork exports to China. This may have helped boost forward sales, and support farmgate prices.
However, some of the optimism around US-China trade relations has abated in recent weeks. The Chinese cancelled some orders of US pork in early May, and futures prices have cooled. With no end to the China-US trade war in sight, the outlook for this market has become more cautious.
Market reports from continental Europe also suggest Chinese traders are now not accepting further price rises. The Chinese government has insisted all frozen pork stocks must be tested for ASF by 1 July. This may be temporarily dampening import demand, as stored pork is pushed onto the market. With this in mind, the small supply of slaughter pigs in the EU has become increasingly important in pushing EU pig prices higher.
Despite these bearish factors, it remains the case that Chinese pork production will fall substantially this year. In the second half of the year, import demand should start to strengthen again as pork stocks are depleted. This offers the potential for further price support.