4 reasons why China continues to demand pork

1. Chinese prefer meat from far away
Chinese consumers prefer European and American pork. According to Dermot Hayes, professor of Agriculture at Iowa State University, an American pig with the Smithfield Food label yields on average twice as much as a Chinese pig. The reason? Consumers have much more confidence in the quality assurance used in America and Europe. According to Hayes, it is more interesting for China to import whole pig carcasses than importing feed raw materials, such as soy and corn, to produce the pigs in China. Because Chinese importers also import at cost price in America and Europe. According to the professor, Europe is still a 'premium supplier' in China, given its market share of approximately 70 percent.

2. America is not ractopamine conclusive 
What America still restricts in China is the drug ractopamine. This drug is banned in China, but Hayes estimates that approximately half of all American pig farmers still use the drug. This limits exports. However, the professor does see a change taking place. Because approximately two years ago, only Smithfield Foods banned the drug, while in 2016 more and more meat processors were pushing to produce ractopamine-free. Chinese needs are mainly driving this change.

Despite the lag caused by ractopamine, it does not mean that the influence of Americans should be underestimated. The American pig herd recorded the highest figures ever measured in the fourth quarter of 2016, and the share of 'China-worthy pigs' is increasing. What will probably strongly influence the battle for China is the level of pig prices in America and Europe. Naturally, the euro/dollar exchange rate also determines whether the European pig sector or American colleagues respond to China. Political relationships and risks obviously also play a role in the background, although these are difficult to estimate in advance.

3. Chinese government has a de-stimulating effect
Although pig prices in China reached historically high levels in the summer of 2016, this does not lead to additional production. The Chinese government has given local governments permission to close pig farms. Last year, the policy was aimed at eliminating the last 'backyard farms' from the landscape, because the pigs literally lived among the Chinese population. Such measures have a serious impact on the pig herd. For example, in a Chinese province, approximately 70.000 companies have been forced to close, causing the production of 5 million pigs to evaporate.

4. Professionalization takes time and requires knowledge
Production is shifting to professional pig farms, but these companies are also being slowed down by stricter regulations. In mid-2017, China banned the production of pigs near densely populated areas. There are also limits on the production of manure. In regions where pig farms are allowed to produce, expansion is quite possible, as is suggested in the corridors. Due to the disappearance of the 'back yards farms', the pig price in China has been trading at a comfortable level for a long time. Pig farmers who do have a 'licence to produce' therefore make attractive returns of up to approximately 80 dollars per pig. Since October, the pig price in China has been on the rise again. At the beginning of January, the pig price was 2,48 euros per kilo of live weight.

Yet Chinese pig farmers in such areas are unable to quickly increase production. For example, the sows in China are not nearly as productive as the European ones and the personnel costs are quite high as a result of urbanization. Due to a lack of automated stable systems, personnel pressure in China is much higher than in Europe, for example. Pig farmers must also pay for environmental measures from 2018.

Due to government intervention, the fluctuating pig prices in recent years and the increasing volumes of pork from Europe and America, pig farmers have little confidence. Because of all this, the willingness to invest is also low. Historical trends show that professionalization of the pig sector in emerging countries takes an average of 10 years. With today's knowledge and developments, it is realistic to expect that China will remain on the market for the time being, although exports remain subject to all kinds of factors that are often uncontrollable.