China pork crisis far from over, despite green shoots of recovery in pig inventory, analysts say

On Friday, China’s agricultural ministry said inventory of breeding sows showed the first monthly increase since April 2018, suggesting a ‘bottoming out’
But analysts are convinced the problem will continue to plague China into next year, with further falls in pig population and surges in pork prices expected

African swine fever

Elaine Chan

Published: 6:00am, 26 Nov 2019

Why you can trust SCMP

Even amid the first rebound in the inventory of breeding sows for 18 months, the fallout from the African swine fever outbreak that has devastated China’s pork industry since August 2018 is far from over, analysts said.

In fact, hog inventory is unlikely to return to growth over the last two months of this year, said Pan Chenjun, senior analyst for animal protein at Rabobank, which means any “steady increase” would not come until mid-2020.

The analysis came after director of animal husbandry and veterinary bureau at China’s Ministry of Agriculture and Rural Affairs, Yang Zhenhai, projected that the decline in pig production was bottoming out. On Friday, Yang attributed the news to government measures implemented in August to ensure the supply of live hogs, which would in turn prevent further prices rises.

The ministry said the national inventory of breeding sows climbed by 0.6 per cent in October, in the first monthly increase since April 2018, reversing a 3 per cent fall during the previous month. It now aims to restore 80 per cent of its infantry of live hog inventory by the end of next year.

However, Rabobank predicted that China needed more than five years before pork production could recover to pre-swine fever levels.

In nearly 16 months that the deadly disease has ravaged farms across all of China’s provinces, authorities have culled more than 1.1 million pigs from an estimated herd of 350 million, according to government data. It is estimated that more than 40 per cent of the hog population has been lost to a combination of disease and cull.

For China, the world’s biggest producer and consumer of pork, the incurable disease has proven to be devastating. For consumers, prices of pork, a staple of the Chinese diet, have surged by more than two to threefold, but the continued decline in production is widening the shortfall and exacerbating the price rise

Rabobank’s Pan estimated that pork production would drop by 25 per cent this year, before a 15 per cent decline in 2020.

The surge in prices has far exceeded what had been predicted... Prices were still low in the first half as we weren’t sure how much frozen pork supply there was, but that supply dropped very quickly

Pan Chenjun, Rabobank

Amid the declining herd count, live hog prices have risen more than 120 per cent in the past six months to 33 yuan (US$4.70) per kilogram this week, according to data from Chinese pig breeding information provider Zhuwang.cc.

To try to make up for the shortfall, China has increased its pork imports by more than 40 per cent to 1.32 million tonnes in the first nine months of the year, official customs data show, but Yang said a further rise in imports was likely for the fourth quarter of 2019.

“The surge in prices has far exceeded what had been predicted,” said Pan. “The main reason being, prices were still low in the first half as we weren’t sure how much frozen pork supply there was, but that supply dropped very quickly, as was the case for hog inventory too. So by October, prices have risen by one to two fold, compared with the same period a year ago.”

But the fluctuations have also trended the other way, Pan said, triggered by panic-selling by pig farmers – when there are further outbreaks – which allowed slaughterhouses to push down prices paid for live hogs, driving the prices down throughout the supply chain. Such was the case when prices dropped nearly 20 per cent from 41 yuan at the end of October to the current level.

Post