China pig price rise: autumn peak or structural?

The Chinese government has been hinting at a slightly smaller pig herd since last August, although the decline has been very modest. According to its own figures, the total number of animals shrank by 2 million animals from July to September, to reach 437 million animals. A decrease of 0,5%. There is still growth in year-on-year comparisons. The government speaks of 60% more slaughters in September compared to last year. However, how reliable the figures are remains a question. Analysts not affiliated with the government speak of a growth of between 18% and 23% in the number of slaughters.

Soy imports are plummeting
China broke record after record for soy imports for a while, but volumes have been declining for several months. Left and right it is being pointed out that more was probably imported in the spring than necessary, causing a stockpile to be built up. Importers bought large volumes at the time, because there was a high demand for and high prices for soybeans. The imported volumes for October are at such a low level that analysts still take into account a smaller pig herd. According to China Custom Statistics, it imported 5,1 million tons of soybeans in October, up from 9,9 million tons in August.

At the same time, the free fall in pork prices stopped towards the end of the summer, followed by a fairly strong recovery. The low was around 11,50 Chinese renminbi in early October. Converted to about €1,60 per kilo. In October and November, prices rose rapidly to around 18 renminbi (€2,60 per kilo). Meanwhile, the futures market for pigs in China is still unimaginative. The prices for January delivery are €2,20 per kilo and for March they are even lower: €1,90 per kilo. A lot lower than the current daily prices. Is the current revival short-lived?

'Very uncertain what will happen in the short term'
Jan Cortenbach of De Heus in China reports that it is also difficult for him to estimate what exactly is happening and whether the recent price increase is structural. "An upturn in pork prices is also a seasonal phenomenon. In the run-up to the Chinese New Year festivities at the end of January, consumers would like to be assured of a piece of pork on the menu." This would at least partly explain the current 'peak' in pig prices.

However, Cortenbach also foresees a number of circumstances that indicate a possibly smaller pig herd (for the time being) than is assumed. "I had actually expected a price increase earlier." In that regard, he continues to question the official figures. "Government data would show that the number of sows and pigs has returned to pre-African swine fever levels. One of the parameters for the government is compound feed production. Although feed production is at a high level, people are ignoring the reduced efficiency. Many heavy pigs were fattened in the past year, but many fattening pigs were also used as sows. These consume feed, but on balance produce fewer kilos of meat. This clouds the feed production parameter as an indicator for pork production." He also sees that reports mention a significantly smaller size than the authorities suggest, even though the numbers are undeniably higher than last year.

According to Cortenbach, many young animals and breeding pigs were slaughtered during the price trough of August and September, especially by smaller companies. "They wanted to avoid heavy losses and, as a precaution, reduced the pig herd. This has provided additional supply, but could also mean that the supply will be smaller in the coming period. Moreover, the situation surrounding African swine fever is still not under control. This is also the case. has made pig farmers decide to have animals slaughtered, especially because the compensation for contamination is far too low. In August, the average slaughtered weight was 135 kilos and for 20% of the supply above 150 kilos. This is an indication that sows were slaughtered during that period." 

For the longer term, Cortenbach is issuing a warning to pig farmers in our country. "Apart from the current uncertainty, it is clear to me that China is moving more towards self-sufficiency, especially if the influence of African swine fever diminishes. The European sector must take this into account in its strategic choices." What certainly doesn't help is the fact that pork consumption is under considerable pressure. Cortenbach predicts consumption per capita to be 3 kilos per person lower than two to three years ago. "Young consumers in particular are more likely to choose chicken, fish, vegetarian or beef."

It remains difficult to estimate for the time being what part of the recent price increase is caused by the seasonal demand effect towards the Chinese New Year, and whether there may actually be a tighter pig supply in the country. In that regard, it will be interesting to see whether the current prices can be maintained towards February and March.