Dim Sums: Agricultural Markets in China

"Large pig farmers are no different from small and medium investors...they chase the huge fluctuation in pork prices up and down." So observed a commentary on China's feedtrade.com.cn web site  earlier this month.  China's agricultural leaders have long blamed "blind" expansion by small "backyard" farmers for the constant gyrations in China's pork industry, but the country's new gang of big hog producers are adding production capacity with little regard for the depressed state of the market, driving the price further below the breakeven point. Annual reports by seventeen hog-producing companies indicate they sold a combined 100 million hogs in 2021. That's 15 percent of national output.  Daily Economic News reckoned that last year's  combined losses incurred by these companies totaled 50 billion yuan  ($7.9 billion). Nearly all of the hog companies lost money--"shocking" losses according to the Feedtrade commentary.  Chin...

China's hog production is plummeting. The National Bureau of Statistics report on economic data for the first half of 2015 showed that pork production was 25.74 million metric tons, down 4.9 percent from the first half of 2014. The number of hogs slaughtered during January-June totaled 334 million, down 5.1 percent from last year. Item Jan-June 2015 Change from a year ago Million metric tons Percent Pork output 25.7 -4.9 Hogs slaughtered 334.4 -5.1 Hog inventory 417.4 -6.0 Source: China National Bureau of Statistics The number of hogs in inventory at the end of June 2015 was 417 million, down 48 million from the 465 million reported at the end of 2014. The 48-million decline in Chinese hog numbers over six months is more than all the hogs in Brazil, equal to three-fourths of the U.S. swine inventory or a third of hogs in the EU. The pork output number for the second quarter was down 7.5 percent year-on-year, twice as fast as the 3.1 perce...

Chinese hog prices have been plummeting for about four months--the latest downturn in a series of cyclical gyrations in China's bipolor hog market which is constantly flipping from surplus to shortage and back again. An interesting recent posting reveals the strategic behavior of Chinese hog producers trying to figure out how to navigate the hog cycle. The writer--apparently a farmer or industry analyst--has seen people writing in an online forum responding to the steep downturn in prices in two opposite ways. Some say they're bailing out of the business and selling off their sows. Others are asking whether it's a good time to get into the business. He speculates that the people selling off their sows have lost confidence, are losing money, piling up debts and ready to give up. People thinking about getting into the business think the cycle may be at its bottom, and expect a rebound in prices and profits later in the year. Ultimately, both groups of people are making a...

This chart showing cyclical movements in hog prices over the past decade was posted on the boyar.cn site to place the current rise in prices in historical context. The Chinese hog price has tended to rise and fall in 3-year cycles. Since July 2010, the hog price has been on the upswing for 12 months, reaching near 15 yuan at the chart's end in May 2011. The article describes the current cycle as having its own unique character of "inflation combustion" and insufficient supply driving prices upward. The 2004-06 cycle was also driven by inflationary pressures in its early stages, says the article, while that cycle's downturn was due to disease outbreaks--similar to 2010. The sharp rise in prices during 2006-08 was due to insufficient supply. The article suggests that the current upswing in price is similar and will take 2 years to play out. The article suggests that hog prices will continue rising until April or May of 2012 before beginning to fall. The article attribu...

This year I've gotten a lot of inquiries about Chinese agricultural data from individuals whose email signature sounds like some kind of investment firm. They are usually interested in statistics on meat consumption. I don't ask questions, but one individual told me his boss wanted a list of Chinese companies to invest in. I think another was working on a major investment in Chinese poultry that was in the news recently. I infer from this that agriculture, especially anything that has to do with or can be influenced by Chinese demand for meat, is the latest investment fad. There have been several big investments in Chinese livestock industry in the news lately. An article in the Aug 31 Washington Post seems to confirm this trend toward ag investments and notes that the shine has quickly rubbed off farm-related stocks. Many of "the smartest guys in the room" working in investment houses and banks have never been through a big agricultural boom and bust before. They may...