China’s demand for imported pork to rise as Beijing closes small domestic producers

WH Group, the world’s largest pork producer, said it expects Chinese demand for imported pork from the US and Europe to keep increasing amid China’s national push to close smaller slaughterhouses and pig farms.

“China’s demand for foreign imported pork will only get larger,” said WH founder and chairman Wan Long, speaking at a briefing last week at the company’s headquarters in Zhengzhou, Henan province. “As small pig slaughterhouses and farms face the destiny of being shut by the government, the price difference between China and foreign countries like the US will remain for a long time.”

China consumes almost half of all pork produced globally each year, or about 31kg per person. Per capita consumption on the mainland is expected to rise above 33.4kg by 2024, according to the Food and Agriculture Organization of the United Nations.

Beijing last year began issuing decrees to selected cities and provinces to shut pig farms and slaughterhouses that did not meet environmental standards, as part of its ongoing national push to modernise the agricultural industry.

“With the limited land resources China has, increasing Chinese demand for imported pork will be a long-term trend,” said Wan.

Shipments from US pork giant Smithfield have been increased from 70,000 tonnes three years ago to 300,000 tonnes last year. WH acquired Smithfield in 2013.

“We will for sure increase our imports of pork from North and South America, as well as countries in Europe,” said Guo Lijun, chief financial officer of WH.

“The growth rate of imported pork, however, will depend on price. The larger the difference is, the larger growth of our imported pork will be, and vice versa.”

Chinese pork prices reached a high of 21 yuan per kilo (US$3.18) last year, but are expected to drop this year by “double digits” in percentage terms, according to estimates by WH.

“But I expected the import of foreign pork to be normalised in the long run despite the narrowing of the price difference,” Wan said.

He said the cost of raising hogs was higher in China than the US.

WH will continue its acquisition of companies in the US and Europe next year, as part of a push to improve sourcing channels for pork.

Equity analysts said the outlook for Hong Kong-listed WH was improving.

“In the long term, we expect rising revenue contribution from new products to be the main source of margin improvement,” said Maggie Zheng, an analyst at CCB International.