China’s pork prices are being restrained, despite declining pig production and tough new slaughterhouse rules that are having an adverse effect on trade and pushing frozen pork stocks onto the market, analysts told Reuters.
The new rules requiring slaughterhouses and processing plants to test for the African swine fever (ASF) virus are slowing down business at many plants and decreasing demand. Hog prices in China have declined in many areas in May, increasing anticipation of a rapid rise in pork prices after widespread culling, Reuters reported.
“The government is checking slaughterhouses, cold storage warehouses and processing firms so nobody dares to buy pigs, kill pigs or sell meat. Live hog demand is fairly poor,” said Feng Yonghui, chief analyst with Soozhu.com.
Larger facilities were required to install testing equipment by May 1, and all processors must be in compliance by July 1. The Chinese agricultural ministry said they would carry out inspections to check up on them.
How Does Frozen Pork Fit In?
Pan Chenjun, senior analyst at Rabobank, said some slaughterhouses have been selling off frozen pork ahead of inspections.
Processors who took advantage of low hog prices after ASF first hit in August 2018 by storing excess product in freezers, need to start selling off their stock. Chenjun estimated China could have about 2 million metric tons of freezer capacity for pork.
Some processors in China are now using more imported meat, further pressuring domestic demand. An official at a major frozen foods company said they are reducing their use of local pork after one of their products was found in January to contain the virus, Reuters reported.
China’s sow herd fell 21% in March and piglet prices have surged to their highest in two years. Because of this, officials have warned of a pork shortfall and surging prices in the second half of the year. Analysts also believe prices will rise again starting in July when the government inspections are finished.
Shuanghui President Ma Xiangjie said hog prices could go above 20 yuan per kg ($1.32 per pound) in the second half of the year, against a national average of 15 yuan per kg on May 1, Reuters reported.
ASF is a highly transmissible, deadly disease of pigs, but it is not harmful to humans and poses no food safety risk. For more information on ASF, visit porkbusiness.com/ASF.