After six months of losses, will Chinese pork producers be forced to cull their herd or exit the market entirely?
Chinese hog prices were down 60% year-over-year at the end of September at the same time production costs have surged, reports Rabobank in its latest Q4 2021 Pork Quarterly report.
“After recent investments, producers are likely to liquidate their least productive three-line sows, while keeping two-line sows. This shift supports our outlook for a year-over-year increase in pork production in Q4 2021 and Q1 2022, limiting further recovery in price,” says Christine McCracken, Rabobank animal protein analyst.
Volatile Demand in China
Pork demand remains volatile, she explains, which is negatively impacting price. At the same time, foodservice demand is sluggish due to strict social measures following new COVID-19 outbreaks. In addition, consumers have been slow to transition back to pork from other proteins.
“Prices of other proteins have been resilient, highlighting weaker-than-expected demand for pork,” she says. “We expect Q4 demand to improve, reflecting a normal seasonal uptick in movement in the winter and higher preserved sausage-making in the south. Pork prices will likely stabilize but may have difficulty moving significantly higher.”
Chinese Government Launches State Reserve Purchases
The Chinese central government launched a second round of state reserve purchases on Oct. 10, with a 30,000-metric-ton increase over the first round of purchases.
This stronger signal of government support combined with the government setting new national sow herd targets and encouraging the financial system to support large-scale farms is indicative of efforts to stabilize pork production in the country.
“Efforts to close farms that do not meet environmental standards and programs to support the regionalization of farming to control the spread of African swine fever (ASF) were also highlighted,” McCracken says.
Pork Imports Fall
Pork imports continue to fall, down 24% year over year in August. Variety meats are flat, Rabobank notes. The year-to-date imports through August are slightly lower. Spain leads the charge as China’s largest supplier, followed by Brazil, U.S., Denmark and the Netherlands accordingly.
“We expect imports to decline further in Q4, resulting in a drop of at least 10% year over year in imports for the full year. We expect imports to remain weak at the start of 2022, as market sentiment is likely to remain depressed,” McCracken says.
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Demand Uncertainty, Rising Costs Will Hinder Growth in Pork Market
$10-Million USDA Grant to Develop Cell-Cultivated Meat in Bioreactors
Dissecting Congress’ $1.2T Infrastructure Plan, What’s In It For Agriculture?
