August 10, 2023

 

Changing supply volume gets China's pig prices swinging

 

Before the African swine fever outbreak in 2018, China's pork production was around 50 million tonnes.

 

Following about five years of recovery, production expanded to 47 million tonnes by 2022.

 

Meanwhile, the shortage of pork during China's ASF outbreak has transformed the pattern of domestic meat consumption. Per capita pork consumption last year decreased by more than 10% compared with the previous year.

 

From the perspective of supply and demand — coupled with an annual pork import of around two million tonnes — China's pork supply in 2022 was no longer in lack. Hence, it was difficult for pig prices to recover.

 

China's pork supply in the first three quarters of 2022 fell gradually from a high level, lifting pig prices gradually during Q2 and Q3. In October, tight pork supply pushed pig prices to a monthly high of over ¥25/kg. With pork supply recovering in November and December, pig prices began to fall again.

 

Projecting pig supply after May 2023 based on the population of Chinese sows, eFeedLink estimated that the Chinese pork supply in 2023 will be slightly more than that in 2022. With business travel and tourism expected to resume gradually, the demand for pork this year should increase 5-10% on-year.

 

Pork supply in the first four months of 2023 was lower than in 2022. In the first four months of 2022, live pig prices were at ¥12.36-13.70/kg; pig prices in the first four months this year were higher in the range of ¥14.00-16.00/kg.

 

Pork supply is set to gradually increase in 2023. Therefore, pig prices are unlikely to recover well or increase significantly this year. Pig prices are mostly projected to move in the range of ¥15.00-16.00/kg (US$2.13-2.27).

 

Price movements will also be affected by other factors. For example, the Chinese government is preparing to start its second round of pork reserve buying. As the pork supply in May and June could fall below past years' levels in the same period (while demand is stronger), live pig prices may likely rise above ¥15.00-16.00/kg.

 

In any case, as the overall monthly pork supply is rising in 2023, the price of live pigs will gradually return to ¥15.00-16.00/kg after a momentary increase.

 

That said, 2023 remains a challenging year for pig producers, with supply poised to expand and prices lacking the impetus to sustain an upsurge.

- Shi Tao, eFeedLink