Genesus Global Market Review: China July 2023

Entering the second half of 2023, when trying to describe the pig market in CHINA, the phrase “no more joy in Mudville” comes to mind. Of course, this is just a line from Ernest Lawrence Thayer's poem "Casey with a baseball bat." it describes the reaction of the hometown crowd when their hero Casey misses the ball, losing an important game. The expression describes any disappointment, a general feeling of sadness or annoyance. Producers are frustrated – hog prices remain low and the industry continues to lose money .

The table below shows the amounts of proceeds from sales of pigs for 13 listed companies in the first half of 2023:

The total proceeds from pig sales in the first half of the year as a whole amounted to about 105.4 billion yuan (US$14.5 billion ) . The average selling price of slaughter pigs was 14.6 yuan/kg ($0.91 US/lb or $2.00 US/kg) and the average production cost was 16.50 yuan/kg ($0.96 US/lb or $2.12 US/kg). The total combined losses of these 13 companies are estimated to exceed 13.7 billion yuan ( US$ 1,895,000,000 ).

It is rather difficult to imagine how the industry can sustain such a loss without significant elimination of sows and an overall reduction in production. We all assumed that by now the market would begin to recover and we are somewhat surprised that we see almost no movement in this direction. There are reports that many of these public companies are selling their shares to local governments to inject additional funds. Although it is not yet known how “deep pockets” even taking into account all the losses of these 13 companies, which are involved in the turnover of more than 525 million dollars a week.

Many companies are simply trying to maintain and maintain current stocking levels in the hope that other companies will reduce their production so that they can benefit from higher prices when the market picks up. Other companies have begun to sell pig farms, sell more weaned piglets and reduce their production capacity. Although so much attention has been paid to reducing costs over the past two years, most companies have already exhausted all possibilities and simply have nothing more to cut.

Unfortunately, in the pursuit of “low cost of production”, the quality of pork has suffered greatly. Manufacturers have gone too far by replacing feed raw materials and vital nutrients. Of course, consumers are always happy with low prices for pork, but not at the expense of reducing its palatability. Taste is what drives consumer demand and higher prices for pigs and pork.

I think the best way to bring Joy back into the pig industry is to focus on producing better tasting pork.