The turning point of the Chinese pork market

In China, pork production rose strongly in the first three quarters of 2021 compared to the weak same period last year, but this growth is gradually coming to an end. National Bureau of Statistics spokesman Fu Linghui said that pork production increased by 38% from January to September 2021 to 39.17 million tons, while the number of slaughtered pigs increased by 35.9% to 491.9 million.

Analysts say that in recent months, low producer prices have led not only to the recovery of the herd after the outbreak of African swine fever (ASF), but also to increased herd elimination, which has increased the supply of pork on the market. There were 437.64 million pigs in China at the end of September, up 18.2% from a year ago, according to the Beijing Bureau of Statistics. However, compared to the end of June, for the first time there was a slight decrease in the number of pigs - by 1.5 million heads or 0.3%.

The same applies to sows, which at the end of September were 16.7% higher than a year earlier and amounted to 44.59 million heads, which is less by 1.1 million heads, or 2.3% compared to with June. According to experts, the recent decline in the number of sows is due to the fall in prices for piglets. According to the national survey, the latest price was 15.30 yuan per kg, equivalent to 41.10 euros for a 20 kg animal. A year ago, record prices for a piglet exceeded 260 euros per piglet.

From the beginning of the year to the beginning of October, producer prices for fattening pigs fell by 70% to 10.20 yuan per kg of live weight (1.36 euros). However, the bottom seems to have been passed here, as the price has risen again to 13.80 yuan per kilogram (1.86 euros) in the last two weeks. But according to analysts, this level is still far from covering the costs, given the high cost of feed; most recently, the loss per pig was reported to have exceeded 100 euros.

In the coming months, demand in China for pork, which has become much cheaper, is likely to increase seasonally in connection with the New Year. This should also benefit slaughter pig prices, which are likely to rise further. When trading live pig futures on the Dalian Commodity Exchange (DCE), the settlement price of the January futures contract was 15,795 yuan/ton (2,120 euros) at the beginning of last week and 16,245 yuan/ton (2,180 euros) for the May contract. However, according to global breeding company Genesus, the average break-even point based on live weight is currently just over 20 yuan per kg (€2.68), so this price increase would be too small for many producers.

Some market observers believe that a prolonged period of prices that do not cover costs will again lead to a decrease in pig production in China. The USDA recently forecast that after a 27% increase in pork production this year to 46Mt, production will fall by about 2.25Mt, or 5%, to 43.75Mt in 2022. Consumption is expected to fall somewhat less sharply - by 4% to 48.1 million tons. This could also lead to a resumption of growth in the import needs of the People's Republic: US analysts expect imports to increase by 250,000 tons, or almost 6%, up to 4.75 million tons 

As in the past, developments in China will have a major impact on the global pig market in 2022, according to the US Department. In addition to China , a moderate decrease in production is also expected in the US by 0.3% and in the European Union by 0.1%. However, if the low price phase in the Community continues for a longer period and exports to China do not resume, analysts believe that a much larger reduction in production is also possible for the EU.