China: Pig market in free fall

Prices in the Chinese pig market have been under strong pressure for several months due to increased supply.

Prices in the Chinese pig market have been under strong pressure for several months due to increased supply. Yesterday, during trading on the live pig futures market on the Dalian Commodity Exchange (DCE), the settlement price of September futures fell to its lowest level since the exchange opened in early 2021. At 19,815 yuan per ton (€2,546), it fell below the low of 20,000 yuan per ton (€2,568) for the first time; the price level was 30% below the level of the very first settlement price set on 8 January. Because pork futures must be physically delivered to China's DCE, they are approaching spot market prices with maturities, but are currently still below that level.

According to surveys conducted in 27 provinces of the country, the average price of slaughter pigs yesterday was only 15.53 yuan (2 euros) per kilogram of live weight, which is 57.6% lower than the level recorded at the beginning of the year. According to analysts, due to high feed prices, the production of pigs for slaughter is possible only at a loss. This is especially true of producers, who in March had to pay around 86 yuan/kg (11.05 euros) for purchased piglets; it was about 220 euros for a 20 kg animal. Meanwhile, the price of piglets fell to 43.50 yuan per kg (5.59 euros), half the price in March.

On the other hand, what worries pig farmers pleases Chinese consumers. According to the National Bureau of Statistics, in April they had to spend about 21% less money on pork purchases than in the same month last year. Data for May, which is expected in the near future, is likely to be similar. Quotations of Chinese pork producers are also declining. The composite index at the end of May fell by about a third of its annual maximum. Although analysts believe that the price decline may bottom out in the next few weeks, no major price increase is expected in the second half of 2021. Thus, the "golden days" for pork exporters to CHINA are likely to end soon.