China Hog Prices Declining

Chinese hog prices are on the decline again after reaching record-high levels in 2016.

Pork market analysts writing in Farmers Daily last week observed that hog prices had fallen 15 straight weeks since the Chinese New Year holiday. The Ministry of Agriculture's weekly livestock price report released May 23--the day after the Farmers Daily article--showed another 2.6-percent weekly decline. The average hog price of 14.34 yuan per kg was 28.6 percent lower than a year earlier.

The Farmers Daily article attributed falling prices to a rebound in production prompted by historically high net returns of 200 yuan on a 115-kg hog in January. While authorities have closed many medium and small-scale farms in their campaign to enforce tighter environmental regulations, many large feed and meat companies are expanding aggressively. Many are building giant sow farms and recruiting farmers to fatten piglets they supply under a "company + farmer" business model. The Farmers Daily writers--analysts with the Chinese Academy of Agricultural Sciences and the Ministry of Agriculture--say sow numbers began to rebound in 2016. They think that the higher productivity of big, technically advanced sow farms is offsetting the constraints of environmental regulations by producing more pigs per sow. Supplies have also been augmented by farm closures that sent more hogs to slaughter.

Surging imports have added to China's pork supply. According to the National Bureau of Statistics, domestic pork production during the first quarter of 2017 was 14.68 million metric tons, up 0.2 percent from the same period in 2016. Customs statistics show imports of hog products totaled 684,800 mt, up 19.5% from the same period a year earlier. Of that total, imports of offal were 338,500 mt, up 17.9% from a year earlier, and imports of chilled and frozen pork were 346,200 mt, up 21% from a year earlier.

The Farmers Daily analysts think the hog industry is back in expansion mode. However, the expansion will be constrained by the cost of complying with new regulations that require hog farmers to invest in manure collection and treatment equipment. Thus, they see little room for further declines in price and anticipate that pork imports will remain at a relatively high level.