On average, pig prices in China are about 50% higher to start this year than last. At about 25RMB per kg, prices are already above the seasonal surge that typically occurs during late summer. Last year, as pig prices started this huge run, wholesale pork jumped from a low of about 17RMB per kg at the start of April 2015 to around 24RMB per kg by late August. The year before, wholesale pork moved from 16RMB per kg to about 20RMB per kg during the summer months.
The reason for this massive spike in pork prices is Chinese supply of pigs, meaning the curiously shrinking inventory of animals. Pig farmers have exited the business in great numbers over the past few years as prices had declined (oversupply) and serious disease (porcine epidemic diarrhea) made smaller producers too inefficient to survive. The result has been an historic reduction in Chinese pig inventory, an ongoing problem from which there may not be a ready solution. From October 2014:
The current sow inventory is the lowest level in 4 years. It is expected that there will be more sows lost in September. The 10.0 per cent loss in sow numbers is about 4.5 million sows-more than 75 per cent (three-quarters) of the total number of sows in the USA-number 2 in the world for sow numbers. Hog production capacity has significantly been adjusted with the main cause being the loss of farm households.
The peak in on-farm hog inventory seems to have occurred in late 2013. Since then, household farms in particular have struggled maintaining not just profitable production but also widespread and easy access to credit. While there continues to be a complicated intersection of factors that have reduced Chinese pork capacity, the fact remains that the reduction is historic and is now starting to impact Chinese households. Between November 2013 and September 2014, the loss of pigs (sent to market) was about 5.8% or 26.7 million – about the size of Canada’s total annual pork production.
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