China issues pig farmer profit warning

The volume of pork produced increases significantly in the fourth quarter. The oversupply will also continue until the first quarter of 2022, the agriculture ministry in Beijing expects. The only way to turn the tide is to reduce production. The Chinese pork market can still work towards the Chinese New Year, when meat consumption always peaks. The Ministry of Agriculture fears that prices will then drop sharply, resulting in heavy losses for pig farmers.

Pig price 30% higher
China previously announced its intention to reduce its sow herd. Reducing production is a priority, the Ministry of Agriculture said. China also buys pork for national reserves to relieve the market in the short term. This seems to work. The average Chinese pig price has risen sharply since the beginning of October, with price increases of up to 30% to 13,75 Renminbi per kilo (live). Converted to approximately €1,79 per kilo. A relatively high price by Dutch standards today, but loss-making for Chinese pig farmers.

The revival is partly because the government recently purchased 30.000 tons of pork, but there is more to it. The weather is bad in the north of China now. The winter conditions there make it difficult to transport pigs from A to B. To ensure sufficient supply, slaughterhouses increase the price of pigs. In addition, the pork market receives background support from increased meat consumption. Due to the significant price drop in recent months, pork has become more affordable for Chinese people with average incomes.

Temporary 
Yet the revival appears to be temporary. When weather conditions become friendlier, supply will probably normalize. Taking into account the sharp increase in pig herds in recent months, the ship will automatically turn, an analyst in China expects. Piglet prices in China are therefore not benefiting from the - probably temporary - revival on the pig market. The profit warning by the Chinese government is a clear signal, also for Europe's export opportunities.