Knowledge

To provide the latest market news and hold online & offline events to assist you being well-informed and making decisions.

20

2022

-

07

China’s Pork Prices Analysis: Prominent Increase in Inventory in Consumption Off-season

Source:


Recently, the production capacity of live pigs has been more than the normal inventory, and de-overcapacity for breeding sows seems to be the old days. Summer vacation still remains to be the traditional consumption off-season. Breeding profit for farmers has changed to positive. Combined with the pig cycle, and the government policy, pork prices are estimated to remain a high and volatile trend in short term, while it still depends on the production capacity and demand in peak consumption seasons in H2 2022.

 

On the 15th of this month, the National Bureau of Statistics announced the data on the number of breeding sows and live pigs in the first half of the year. As of the end of June, there were 42.77 million breeding sows and 430.57 million live pigs. The production capacity of breeding sows has reduced since July 2021. There was 41.77 million in stock in Apr 2022, which stopped falling and rebounded in May and June.

 

Taking the commodity pig market cycle for sale as 10 months, the supply of live pigs from Q2 2022 to Q1 2023 is estimated to show a YoY or MoM decrease to a certain extent. Also, there may be some mismatches in short-term supply and demand caused by slaughtering companies reluctant to sell or abrupt animal diseases. In fact, this de-overcapacity situation has been revealed in the futures market.

 

During the 14th Five-Year Plan period (2021-2025), the normal inventory of breeding sows in China is set to be 41 million, with a minimum of no less than 37 million. The data in late June was 4.3% higher than expected. There still exists no supply gap for the current rising live pigs. Thus the changes in production capacity still need to focus to discuss whether there will be a trending opportunity for pork prices to rise in long term.

 

Now with the off-season of traditional pig consumption, coupled with the rise in pork prices, it is difficult for the demand side to improve greatly in short term. The slaughterhouse weathered prominent losses with the slaughter volume felling week-on-week, and also the terminal delivery was not smooth. In terms of boosting further demand, traditional festivals need to be focused on.

 

For pork imports, 130,000 tons were imported in May, and 680,000 tons from Jan to May, a YoY decrease of 65.2%, which is mainly attributed to the sufficient domestic supply and the rise in the tax rate of imported pork. In regard to the policy, the authority has constantly emphasized prohibiting intentionally hoarding to raise prices. Moreover, the National Development and Reform Commission also stated that pork reserves will be released in due course.