Chinese pig farmers will return to profit in the third quarter

Chinese pig producers should return to profit in the third quarter after more than a year of heavy losses that have eroded rural incomes and reduced demand for some feed ingredients.

However, there are some uncertainties, Yang Zhenhai, director of the Bureau of Animal Husbandry and Veterinary Medicine under the Ministry of Agriculture and Rural Affairs, said at a media briefing without elaborating.

Since last summer, high feed costs have largely contributed to the industry suffering some of the biggest losses ever, raising the risk that farmers will go out of business and that future supplies will be inadequate and expensive. This worries the Chinese leadership , who is concerned about food security.

However, prices for live pigs began to rise significantly last week, due in part to temporary supply shortages caused by transport restrictions to contain outbreaks of COVID-19 .

It is also believed that many producers have sold sows in recent months, sparking speculation about an upcoming supply cut.

Yang said that favorable factors, including a large number of newborn piglets and a significant reduction in feed costs, will lead to Chinese pig farmers' profits returning by the third quarter.

But he also warned against over-culling sows. “I heard that many producers are culling sows, but not so many small and large producers are culling,” said Pan Chenjun, senior analyst at Rabobank.

This means that although profits will return by the third quarter, a large increase in hog prices is unlikely, the expert notes.

Pig futures in China rose this week, with the most active contract, September, trading at 18,165 yuan ($2,839.30 ) a tonne, the highest since October.