News Pigs
'Chinese consumer ignores pig'
Years of skyrocketing pig prices have ensured that there is structurally less consumer demand for pork in China. Even now that pork prices have normalized and the supply is ample, pork appears to be clearly less popular. That's what analysts report this week. Listed pig producers in China have already seen $75 billion in market value go up in smoke.
Darin Friedrichs, analyst at financial services firm StoneX, sees that Chinese consumers more often bought beef, chicken and fish during the pork price peak. He predicts that the peak in pork consumption is behind us. "We are entering a period of structurally lower demand," he told the Financial Times. This is despite the fact that pork prices have now fallen 54% and are back at levels before the first outbreaks of African swine fever (ASF).
Pig cycle disrupts
At the same time, according to Friedrichs, the well-known pig cycle will be less prominent than it used to be. Previously, small pig producers often withdrew from production at low prices. According to him, large companies will continue to expand during this period to gain market share in the largest market for animal proteins. Friedrichs: "Large companies have advantages in terms of financing costs, subsidies and raising capital. It will accelerate the shift where production increasingly takes place on large companies."
The analyst further notes that since the beginning of this year, €75 billion in market capitalization of listed pig producers has already evaporated. The combined value of these funds peaked in January this year. After the rapid collapse of the Chinese pig quotes, the prices of these companies have also fallen sharply.
New Hope Group, one of China's largest pig companies, already apologized to shareholders last month. The company is in the red for the first time in years. The company's CEO pointed to weak consumer demand, the corona pandemic and the outbreaks of AVP.
China's outlook cloudy
How the Chinese market will develop in the coming year remains very unclear. Just last week, the United States Department of Agriculture (USDA) released a forecast that pork production will shrink strongly† The USDA also speaks of declining consumption, but according to the institute this is mainly prompted by a tighter availability.
Steve Wissink
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