By Dominique Patton
Chinese hog farmers should return to profit in the third quarter, a farm official said on Wednesday, after more than a year of heavy losses that have eroded rural incomes and curbed demand for some feed ingredients.
There are still some uncertainties however, Yang Zhenhai, director of the Animal Husbandry and Veterinary Bureau under the Ministry of Agriculture and Rural Affairs, said at a media briefing, without elaborating.
Since last summer, high feed costs have heavily contributed to the industry running some of its worst-ever losses, raising a risk that farmers will quit the business and that future supply will be inadequate and expensive. That is a worry for China’s leadership, obsessed about food security.
However, live hog prices began to pick up significantly last week, partly because of temporary supply shortages caused by transportation curbs to contain COVID-19 outbreaks.
Many producers are also thought to have sold off sows in recent months, raising speculation of an upcoming reduction in supply.
Yang said favorable factors, including a high number of newborn piglets and large decline in feed costs, would lead to farm profits returning by the third quarter.
But he also warned against excessive elimination of sows.
Yang’s department oversees the pig sector.
“I heard that sow culling was big among many producers, but backyard and large-scale producers have not culled a lot,” said Pan Chenjun, senior analyst at Rabobank.
That meant that, although profits would return by the third quarter, a large rise in hog prices was not likely, she said.
China hog futures have rallied this week, with the most active contract, September, trading at 18,165 yuan ($2,839.30) per tonne, the highest since October.
($1 = 6.3977 Chinese yuan renminbi)
(Reporting by Dominique Patton; Editing by Muralikumar Anantharaman, Christian Schmollinger and Bradley Perrett)
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