Chinese pork prices no longer soar

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Pork prices in the world’s largest market have fallen more than 56% since January

After two years of soaring pork prices, China now faces the opposite problem: a depressed staple food market.

Pork prices in the world’s largest market have fallen more than 56% since January, after two years in which many Chinese pig farmers struggled to control the spread of African swine fever.

The disease is not harmful to humans, but it is very contagious and fatal to pigs. At one point, the country’s pig population was down about 40% from the previous year, leading to pork shortages and forcing China to import more meat from overseas.

Chinese farmers have spent much of the past year rebuilding their herds, before domestic pork supplies normalized and prices started to drop. China’s pig population now stands at around 439 million, up from 370 million last year. In September, the wholesale price of pork was 20.24 yuan, the equivalent of $ 3.13 per kilogram, its lowest level this year, according to data provider Wind.

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A number of factors have driven prices down. Farmers who were fattening their hogs while waiting for prices to pick up scrambled to sell their heavy hogs when prices fell earlier this year. New outbreaks of African swine fever in parts of the country have also caused panic sales as farmers fear the disease will affect their pigs.

Analysts say a strong rebound is unlikely even as the Lunar New Year, one of China’s biggest holidays, approaches in early 2022.

Pan Chenjun, senior analyst at Rabobank, said she only expected a slight rebound in prices in the coming months, although the Lunar New Year holiday is generally a peak season for pork consumption in the coming months. the country. China’s zero tolerance for Covid-19 has restricted travel and group meals, which will continue to weigh on pork prices, she said.

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Pork prices have been below breakeven for producers for six months now, Pan added. The pork / grain ratio, an indicator of the profitability of pig farming, has declined in recent months. Cereal prices have also increased due to strong demand.

China’s state planning agency bought pork for reserves in a bid to help stabilize prices after China’s National Development and Reform Commission warned in late June that the ratio had entered a level of “excessive decline”.

China’s live pork futures, which debuted on the Dalian Stock Exchange in January, have also collapsed in recent months.

Low prices are expected to drive out some small producers, which could lead to tight supplies and higher prices. But more of China’s meat industry is now made up of large, well-capitalized companies that will continue to raise pigs during the depressed part of the price cycle, said Darin Friedrichs, senior commodities analyst for the Asia at StoneX.

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“This additional offer limits future price increases,” he said.

Pork has long been a major source of protein in China. But a shortage and surging prices in previous years, as African swine fever became the worst outbreak of livestock disease in the country in decades, have changed behavior. When prices were at their peak, people turned to alternatives like poultry and fish, Friedrichs said.

Companies like meat processors have also used poultry as a substitute when pork prices were high, and some of those changes could be permanent, said Ms. Pan of Rabobank.

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