China starts buying pork

The price for live pigs in China fell for months in a row and reached the lowest level in at least 21 years on June 2. This made it no longer possible for many pig farmers to operate profitably. A large number of pig farmers then decided to offer extra animals for slaughter to avoid a further decline.

This caused the government to fear that the oversupply could turn into a shortage in the second half of the year. A Chinese government committee indicated a few weeks ago that it would intervene in the market if the situation required it. The plans for purchasing pork that were already unfolded at the time are now being implemented.

Storage space is a question mark
A Rabobank analyst in the country expects, Reuters reports, that the total volumes that will be purchased may not be large. The supply of pork has recently been very large, which means that companies may already have taken up a lot of storage space. There is simply not much space available for the government to store purchased volumes somewhere in cold stores. The last time the Chinese government added pork to the national reserve was in February and March 2019. The volume ultimately amounted to 200.000 tons.

Prices had already started to recover before the purchase
The pig price in China reached a low point on June 21 after a months-long decline. The price for live pigs was then recorded at 12.9 yuan (€1,68) per kilo. Yesterday (Monday, June 28), the pig price was 17,35 yuan (€2,26) per kilo.

The contract price for live pigs on the Chinese futures market for delivery in September 2021 also recovered sharply. After the price for this delivery month reached a low of 16,67 yuan (€2,17) at the beginning of last week, it recovered during the course of last week and at the beginning of this week to a level of 19,24 yuan (€2,50). ) per kilo. The now announced pork purchasing scheme may further support prices.

European market under pressure due to collapsed Chinese demand
Pig prices have been under pressure in many European countries in recent weeks due to a drop in Chinese demand for pork. In recent months there has been a wide supply of heavy animals in the country. Combined with record high import volumes in the first 4 months of the year, this caused a significant drop in the Chinese need to purchase foreign pork. In May this year, Chinese importers bought 40.000 tons less pork than in May 2020. That was a decrease of 7%.

The recent price recovery in China is caused by a smaller supply of heavy animals. According to the Rabobank analyst, a tighter supply in the second half of the year is 'likely', because many pig farmers have offered their animals for slaughter out of fear of even lower prices.