Analysis Pork
Xi Jinping can't avert pig price rebound
Chinese pig prices have taken big steps up. The advance is no fad, but has been going on since mid-August. The past two weeks have been particularly hard. An imbalance between supply and demand is the driving factor. The Chinese government is trying to turn the tide by massively releasing state stocks of pork, but this is not stopping the price rally.
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The average Chinese pig price today (October 12) is 26,46 yuan per kilogram of live weight. This equates to an increase of 20% in just two months. The pig price is now at the highest level in eighteen months. A year ago, the pig price was no less than 116% lower.
The increase is due to an imbalance between supply and demand. Chinese analysts describe pork consumption as good, despite ongoing lockdowns in the country. The pig supply is also limited, partly due to the record high prices of soybean meal. This dampens the motivation of pig farmers to scale up. Pork production in China may increase by 9% this year to 51,8 million tons, but it is still well below the level before the outbreak of African swine fever in 2018.
Government intervenes in vain
The Chinese government is trying to slow down the price rise by marketing pork from the state's reserves. After all, pork weighs heavily in the Chinese inflation basket. In August, inflation in China was 2,5%, mainly driven by rising pork prices. This is not much compared to Europe and the US, but consumers in China also complain about the higher cost of living. Due to the price spurt on the Chinese pig market in September, a further rise in inflation is looming.
However, the government of President Xi Jinping wants to prevent the increase in inflation at any cost. In recent months, no less than 70.000 tons of pork from the state reserves has been put on the market and another release has already been announced. Stocks were also released en masse at the regional level. It is estimated that 200.000 tons of pork was brought to the market from stocks last month, never before so high in a month. Despite this, pig prices continued to rise.
US already exports more meat
Chinese analysts do not expect the price recovery to continue unbridled. Pig prices are already showing a leveling off trend, but have made significant gains in recent weeks. European pork exporters do not (yet) notice any extra demand from China. The US pork export figures for August show an increase in demand. That month, the US shipped just under 35.000 tons to China, an increase of 18% from the same month last year. In the preceding months, export volumes continued to decline, which means that there is now a trend.