China Livestock Market Series: Pork Market

The information portal Meatinfo.ru continues to publish articles on the state and forecasts of the development of the livestock market in CHINA (based on FAS materials). 

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PRODUCTION

Pork production will decrease by 14 percent due to fewer pigs and lower profits for producers.

In 2022, a reduction in the number of pigs and lower profits will limit pork production. Government policies to control rising pork prices will discourage new pork producers from entering the market. Manufacturers that have made large-scale investments in 2021 will aim to expand production in order to meet their loan repayment obligations. 

 In 2021, NDRC and MARA announced financial support for producers who suffered significant losses due to lower pork prices and were forced to cull part of the breeding herd. These programs are expected to continue until 2022 and will primarily benefit producers who have made large investments in production.

Pork production in China (thousand tons of carcass weight)

Pork

2020

2021 (forecast)

Growth per year,%

2022 (forecast)

Growth per year,%

Production for slaughter  

460000

600000

30.4%

530000

-11.7%

Production  

36340

48000

32.1%

41500

-13.5%

General import

5278

4750

-10%

5100

7.4%

General EXPORT

one hundred

one hundred

0%

90

-10%

domestic consumption

41518

52650

26.8%

46510

-11.7%

In 2022, it will be difficult for small producers to start or return to pig production, while large and medium-sized producers will have lower profit margins but will benefit from government subsidies introduced in 2021. Environmental regulations and a focus on sustainable agriculture will also limit the number of small producers able to start new production. In 2022, vertically integrated pork producers with large or medium capacity will be the main players in the industry and will increase production efficiency.

CONSUMPTION

Consumption is forecast to decline due to reduced pork stocks and changing consumer habits.

In 2022, pork consumption will decrease, primarily due to a reduction in domestic pork supplies. Other factors that will affect pork consumption include changing consumption habits in Tier 1 cities* (*Chinese analysts consider Beijing, Shanghai, Guangzhou and Shenzhen to be Tier 1 cities), including a shift in consumer preferences towards other types of protein, including MEAT poultry, beef, aquatic products, and other protein alternatives.  

For example, “healthier” eating trends are driving the shift away from pork consumption in favor of poultry products. However, these trends are at an early stage. Yet consumers in China still prefer pork over other animal proteins.

 Even though consumption is projected to decline in 2022, opportunities to expand distribution channels for pork through various retail and online stores will continue to expand. Public procurement programs, supermarkets and e-commerce marketplaces will provide consumers with greater access to purchase domestic and imported pork products.

 Also in 2022, consumption of chilled and packaged pork is projected to increase. Government organizations such as the State Council, NDRC, MARA and provincial governments have announced funding opportunities for cold chain infrastructure to support the expansion of e-commerce in general and in rural areas in particular.

Policies to curb the spread of ASF and other animal diseases provided additional funding to build slaughterhouses closer to production centers* (* In July 2021, NDRC published an announcement of up to US$7.7 million ( 50 million RMB) for logistics development cold chain associated with slaughter and meat processing facilities).

These innovations will encourage an accelerated transition to the growth of chilled meat consumption, experts are sure. In addition, the demand for chilled meat is expected to increase in 2022 as e-commerce expands. Consumers are also predicted to purchase fresh meat* through e-commerce channels as an alternative to farmer's markets, which have become less common in Chinese cities . Improved logistics and cold chain infrastructure will allow e-marketplaces to make such an offer to their customers.

 (* Fresh meat is pig meat that has not been refrigerated or frozen. Historically, live pigs were transported from production areas in northeast and southwest China to consumption areas where they were sent for slaughter. Chinese planning and regulatory authorities are increasingly discouraging the practice of transporting live pigs for slaughter in other regions to limit the spread of animal diseases such as ASF. Regulations on the transport of live pigs are forcing consumers to switch to chilled or frozen pork).

Consumption of processed pork products will rise

In 2022, the consumption of processed pork, including packaged, partially and fully cooked products, will increase. In 2021, consumer demand for these products increased following restrictions imposed during the covid-19 pandemic . In 2022, the processed meat category, which will account for approximately 20 percent of total meat consumption, will expand into Tier 2 and Tier 3 cities* markets have limited foreign competition, are densely populated, have relatively high levels of disposable income and improved supply chain infrastructure) as companies seek to expand into new markets.

TRADE

Pork imports are projected to reach 5.1 million tonnes in 2022 due to limited pork supplies in China's domestic market. Domestic price controls on pork may reduce the price advantage of imported products, but consumer demand is driving purchases of imported pork. In 2022, consumers will continue to increase their use of e-commerce platforms for home shopping. Suppliers of imported meat products will use these channels to expand their sales and market share in the Chinese market, as well as increase consumer awareness of branded or specialty products.

In 2022, the volume of imported pork sold through e-commerce platforms will increase as it is a new marketing channel that supports the growth and differentiation of imported products. The use of imported frozen pork in the catering and food processing sectors will also increase due to limited domestic supplies of pork.

In 2022, the international shipping and port problems caused by the COVID-19 pandemic are expected to be resolved. In 2020 and 2021, shortages of ship cargo space and a shortage of refrigerated and frozen food refrigerated containers caused widespread supply chain disruptions and significantly increased transportation costs.

Chinese pork exports are forecast to fall to 90,000 tons due to low supplies and competition from Germany. In 2022, China will export less pork due to reduced domestic supplies. China will compete with Germany, which exports pork to Hong Kong, China's number one export market. In addition, the emergence of a delta COVID-19 could continue to put pressure on global demand as many countries could re-impose restrictions, triggering a decline in demand for Chinese exports in 2022.

RCEP Agreement

On November 14, 2020, China joined 14 countries in the Asia-Pacific region to sign the Regional Comprehensive Economic Partnership Agreement (RCEP). This is the first trade agreement between China and Japan. This agreement reduces tariffs on the export of vegetables and fish from China to Japan. However, many commodities, such as pork, have been excluded from the scope of the tariff reduction under this agreement.

The RCEP agreement is expected to have little impact on Chinese agricultural imports from the US, as most RCEP countries already receive low or zero tariffs under other bilateral free trade agreements, or do not compete with US exports to China.