China's live pig prices decreased for 20 consecutive weeks
For almost 5 months now, live pig prices in China have dropped continuously, going down from 36.8 yuan ($5.60)/kg in January to 15.8 yuan ($2.31)/kg, current slaughter pig price. That triggered a third-level alert by the National Development and Reform Commission. The recently formed commission aims to alert producers to make changes in their production plans, while at the same time adjusting pork reserves to stabilize prices, informs Lyle L. Jones, Genesus Director of Sales, China.
"The last two years of high prices and huge profits spurred massive investments by large-scale producers and outside investors into the industry. At the same time, local governments have been supporting the construction of new modernized farms within their own areas. Thus, the rapid expansion has resulted in increased production capacity and more pigs to the market," he explained in his latest market report.
According to statistics from the Ministry of Agriculture (MARA), the number of sow’s capacity in China has increased for 20 straight months as of May, up 19.3% year on year or the equivalent of 98.4% of the end of 2017. Officials also reported that the hog inventory increased by the same pace, up 23.5% year on year and 97.6% of end of 2017.
"Industry experts say that heavier carcass weights (130kg) from producers wanting to capitalize on higher prices have contributed to more kg of pork on the market. Also, continued pork imports meant to assure supply have affected the market price. Finally, the summer season is historically a time of lower demand. China’s pork production structure has undergone significant changes. High prices and huge profits have accelerated the shift to large-scale farms," Mr. Jones added.
According to MARA, the number of large-scale farms (>500 pigs per year) increased from 160,000 to 178,000 in 2020. In May, the number of pigs slaughtered by large-scale companies in China was reported to be 19.96 million, a year-on-year increase of 44%.
According to survey data, the total annual output of public listed companies in 2017 was 34.42 million head accounting for only 4.9%. By the end of 2020, the annual output of public listed companies had reached 53.26 million head, an increase of more than 50%.
However in 2021, rising feed costs and increased costs of production coupled with lower prices have tempered expansion plans for many entrepreneurs."Our observations are that some companies may continue with their plans, but most have slowed down or even paused until prices improve," confirms Lyle L. Jones.
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