Pig stock in China shrinks, price climbs out of trough

Without giving exact numbers, according to the Ministry of Agriculture in Beijing, there were almost 2% fewer fattening pigs in June than 1 month earlier. Last May, the pig herd was already 2% lower than the same month 1 year earlier.

De shrinking pig herd corresponds to the increasing number of slaughters; in the first quarter of 2018, 1,9% more pigs were slaughtered. In total, approximately 200 million animals were on the slaughter hook during that period. In line with this, meat production increased by 2,1% to 15,4 million tons.

Significant losses on the farmer
The pig herd in China is generally cyclically driven. Pig prices have fallen sharply since the winter of 2017; In mid-May it was at its lowest point in years. Converted from Chinese renminbis to euros: €1,37 per kilo (live weight). The result is that pig farmers have to pay approximately €25 per delivered pig. This significant loss motivates people to clean up after animals, while some major integrations impose a construction freeze. The piglet price has also fallen sharply in recent months.

(Text continues below the chart)After a sharp price drop, the pig price in China is on the rise again. 

Although the Chinese pig sector is growing rapidly professionalizes, reportedly 25% of production is still in the hands of so-called 'backyard farms'. These are companies that scale up as prices pick up. In bad times, this principle applies exactly the other way around, as is evident from the shrinking number of pigs.

Price is picking up again
Meanwhile, the Chinese pork price is on the rise again in almost all provinces. In 1 month, the pig price has increased by €0,10 per kilo. This increase fits in with the seasonal pattern of the pig market in China. Prices usually rise from June to December, with a turning point at the turn of the year. Naturally, some fluctuations can be observed in between. Based on the past, the low point is behind us. This may provide relief for European pork exporters.

In the first 4 months of the year, European member states exported more than 463.000 tons of pork (carcass weight) to China. Compared to the same period 1 year earlier, this is a decrease of 5,9%. The problem is that prices are under greater pressure than volume.

On balance, EU member states exported 4% more to 2018 million tonnes of pork in the first 0,2 months of 1,29. Revenues, on the other hand, fell by €186 million to €2,4 billion. In addition, the euro significantly stronger than in recent years. This explains why pig prices in Europe are currently around €0,30 per kilo lower than 1 year ago.

The improving pork price may offer some price relief for European meat exporters. Given the price slump that the Chinese pig sector has to climb out of, it is not realistic to expect major impulses in Europe in the short to medium term. Certainly not because the competition from the United States and Brazil is fierce.  

Excellent perspective
From an underlying perspective, sales to China are still promising. In 2018 imports China reportedly 1,5 million tonnes of pork, the vast majority of which is supplied by European exporters. By comparison, until 2014, China never imported more than 800.000 tons. The Chinese population is still growing, while the middle class is becoming increasingly prosperous. China will therefore remain a promising, but at the same time indispensable, sales market in the coming years.