China making progress in rebuilding pig population, but supply gap likely to last at least until 2021
- China’s pig population was first devastated by the African swine fever last year before being hit again by the coronavirus pandemic
- Pork prices have also soared as a result, with the government responding by releasing a record amount from its frozen pork reserves this year
China claims to have made significant progress towards rebuilding the nation’s pig production that was first devastated by African swine fever and then hit by the coronavirus pandemic, although experts believe it will take at least another year for pork supply problems to be solved.
There are now 171,000 pig farms across the country with an annual output of over 500 pigs, up from 161,000 at the beginning of the year, according to the Ministry of Agriculture and Rural Affairs.
Around 23,000 pig farms were either opened or resumed operations so far this year, with 2,030 new farms built last month alone, official data showed.
“The turning point is just around the corner,” said Feng Yonghui, chief analyst at meat industry portal Soozhu.com.
To further ease supply tensions ahead of the traditional spike in demand during the “golden week” holiday that starts with National Day on October 1, the government auctioned a further 20,000 tonnes of frozen pork reserves on Friday, bringing the total this year to a record high of 590,000 tonnes.
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Beijing elevated the resumption of pork production to a “major political task” a year ago, prioritising it above the trade war with the United States and the political unrest in Hong Kong.
The outbreak of Covid-19 and summer floods in southern China temporarily interrupted the government’s push to revive pig stocks, but the latest official data showed that the recovery had regained momentum.
Pig farmers continue to expand their production capacity, driven by the strong market
China had 3.5 per cent more fertile sows in August than the previous month, climbing for the 11th consecutive month and up 37 per cent from a year earlier. The stock of live pigs also rose 4.7 per cent from the previous month, increasing for the seventh straight month and up 31.3 per cent from a year earlier, according to the agriculture ministry.
“Pig farmers continue to expand their production capacity, driven by the strong market … with the accelerating recovery of live hogs, the balance between pork supply and demand is improving gradually, while prices have tended to stabilise,” the ministry said.
The expectation that a larger supply will lead to a drop in profits has led to panic selling by some farmers that has depressed pig prices recently, Feng from Soozhu.com added, with prices set to begin a downward trajectory after the golden week holiday.
Liu Yonghao, the founder and chairman of the New Hope Group, one of China’s largest pig breeders, said earlier this month that pork prices would return to normal in the middle of next year.
There is still expected to be a gap between production in 2021 and the normal level, so the balance between supply and demand will still be tight next year
The average pig price across the country fell by 1.5 per cent on Thursday from the previous day to 34.21 yuan per kilogram, according to the data compiled by Soozhu.com, but was still 27.17 per cent per cent higher from a year ago.
The nationwide average wholesale price of pork also declined by 1.2 per cent last week compared to the previous week, according to figures from the Ministry of Commerce.
Wang Zuli, chief expert on pig production at the Ministry of Agriculture and Rural Affairs, also forecast that pig prices will likely start a trend lower in the fourth quarter of 2020.
Annual pig production capacity this year is expected to recover to 80 per cent of the level before African swine fever, he said, adding that market supply would increase significantly from this month.
“There is still expected to be a gap between production in 2021 and the normal level, so the balance between supply and demand will still be tight next year,” he said, adding that it would not be until 2022 that new production capacity would translate into a greater supply of pork.
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China has not reported a new case of African swine fever since the end of July, but Wang warned that the country needed to further assess the damage to the pig farms caused by flooding, and that the outlook for domestic pork production would still depend on the continued containment of the disease as well as Covid-19.
The US Department of Agriculture has forecast that China’s pork production will total 41.5 million tonnes in 2021, an increase of 9 per cent from 38 million tonnes in 2020, but still 3.6 million tonnes short of the expected consumption next year.
The department estimated at the start of August that China’s pork reserves would be depleted by the end of September so “the government’s ability to directly intervene in the pork market will be more limited in the second half of 2020 and into 2021”.
The level of pork reserves remains a state secret in China, while the National Development and Reform Commission said earlier this month that the authorities would further increase the release of frozen reserves ahead of the golden week holiday.
China imported 2.5 million tonnes of pork in the first seven months of the year, up 150 per cent from the same period last year, according to the data published by the agricultural ministry.
Wang forecasts that China will purchase 3.5 million tonnes to 4 million tonnes of pork from the rest of the world this year, up from 1.99 million tonnes in 2019.
