Monday, September 30, 2019

Guessing at China's Pork Supply

China's wholesale pork price in the third week of September was up 81 percent from a year earlier, according to the Ministry of Agriculture and Rural Affairs (I calculate 71 percent). That's much stronger than the 47-percent rise reported recently by the National Bureau of Statistics.
Source: China Ministry of Agriculture and Rural Affairs. 

It's hard to discern the actual pork supply and demand situation in China because the country's news media are crammed with reports about farmers regaining confidence, the government's "good" and "effective" policy measures, and obediently chanting the mantra, "restoring production capacity and stabilizing pork supply," in obedience to Vice Premier Hu Chunhua's orders to "manage public opinion" regarding pork supplies given a month ago.

In a speech to a Dalian corn industry conference this month, a Chinese Academy of Agricultural Sciences researcher remarked that China's pork industry had experienced an unprecedented loss of production capacity that he estimates to be 20 percent, or 10 million metric tons. He notes that there are a wide range of estimates and the reduction in production capacity varies widely from province to province. The researcher estimated that consumption of pork is down 11-12 percent, due to fears of disease and its high price. He said many of his acquaintances have stopped eating pork.

Data from the Ministry of Agriculture's feed industry association for the first half of 2019 revealed that production of feed for piglets and sows dropped 25 percent from a year earlier while compound feed for finishing hogs was up slightly. This breakdown of feed for different stages of pig production is never reported to the public, but the sharp decline in piglet and sow feed and is consistent with the impacts of the disease on breeding and multiplier farms. The increase in feed for finishing hogs may reflect a shift from on-farm mixing of feed to purchase of manufactured feed from reputable companies to avoid risk of getting the ASF virus from corn or wheat bran from infected regions. Feed output for meat- and egg-producing poultry increased by double digits, and feed for ruminants went up 4.9 percent.

China industrial feed production, 
first half 2019
Type of livestock
year-on-year change

1000 metric tons
  Finishing hogs
Layer poultry
Meat poultry
Source: China Feed Industry Information Net.

A Ministry of Agriculture and Rural Affairs propaganda article cited a 2.2-percent rebound in piglet feed production during August--the first increase in 5 months--as a portent of a pork supply rebound. The volume of 1.46 million metric tons, however, was well below the monthly average of 3.1 mmt this blogger calculates from the data for the first half of the year.

In a separate speech to the Dalian corn conference, a grain logistics specialist from northeast China estimated that ASF has reduced corn use for swine feed by 30 to 40 million metric tons this year, twice as much as they had estimated at the beginning of 2019. He sees a 5-7 million metric ton increase in poultry feed partially offsetting the decrease in pig feed demand. This speaker discerned a bottoming-out of pig inventories in August, with possibly a tiny increase in September.

Vice Premier Hu Chunhua repeated his proclamation that restoring pork production is a "major and urgent task" during his inspection of farms and slaughterhouses in three provinces last week. Hu issued another exhortation to ensure pork supplies for the new year holidays and called for officials to fight to restore pork supplies to normal next year.

This will be difficult to accomplish, even if there are no more major outbreaks of ASF or other diseases. It takes about 14 months to raise a pig to maturity (including the gestation period), and it will take one or two generations to rebuild grandparent and parent breeding herds before normal supplies can be restored.

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