How Close is China's Pork Industry to Full Recovery?
BrettStuart_China_US_Exports
Exports to China were monumental for the U.S. pork industry in 2020. Understandably, everyone wants to know how their pork industry recovery is coming along.
According to the Chinese government’s report in December 2020, the industry is 90% recovered and should be back fully recovered by the second quarter. But most U.S. experts disagree.
“It's hard to know,” says Brett Stuart, economist and founder of Global AgriTrends. “The key indicators we have are the trade data that we can rely on. We also have price data that's pretty good.”
Stuart says a 90% recovery would make more sense if their hog prices weren’t 100% higher than they used to be.
“Their hog prices are incredibly high, which suggests that they're nowhere near recovery,” Stuart says. “The Chinese hog sector is unbelievably complex, the vast majority are still small farmers, the big commercial, publicly traded companies are expanding very quickly, but they're still far less than half of Chinese production.”
Expansion is taking place at a fast rate, but these larger hog operations are also running into challenges with permitting, finding the acreage to build new buildings and increasing disease issues. In addition to stories claiming unregistered vaccines have actually created new variations of African swine fever (ASF), producers are fighting other diseases like porcine epidemic diarrhea and pseudorabies.
“Recovery is not an easy thing. There's no one solution to say, ‘O.K., we just put money behind this and it fixes itself.’ There's been incredible money behind it for a year and a half and their prices remain very high,” Stuart says.
He believes the key factor to watch is the China hog price, which “goes up and down like a yo-yo” but still remains very high.
“My key assumption for my forecast is that the China hog prices are going to remain above 26 RMB for the rest of the year. Before ASF, a common price in China was 15 to 18 RMB per kilo on a live hog. Today, they're at 31. That's the thing to watch.”
Maybe a year from now we can ask those questions again, Stuart adds, but he still doesn’t know if the Chinese hog industry will fully recover to pre-ASF levels.
“There may be some stabilization that relies more on imports than they have on the past,” he says.
Read more about the 2020 pork export and Stuart's outlook for 2021 here.
