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China’s hog herd to expand for first time in four years

The size of China’s hog herd – one of the most important numbers in world agriculture – will rise for the first time in four years, after being undermined by a dent to pork demand fuelled by a crackdown on official banquets.

The US Department of Agriculture’s Beijing bureau, in its first forecasts for Chinese livestock dynamics next year, forecast a rise of 1.3m head in total swine inventories over the year, to 421.7m head.

While the forecast increase in the herd is only small in percentage terms, it would bring an end to a period of marked decline in the Chinese swine herd, which accounts for approaching 60% of the world total hog population.

Numbers are seen ending 2015 down more than 55m in three years, a loss equivalent nearly to the combined size of the Brazilian and Russian herds, the world’s fourth and fifth biggest.

Banquets off the menu

The decline reflected a drop in pork prices from early-2013 highs, which left producers facing an “extended period of losses”, and was in part down to the knock-on effects of a clampdown by China’s president, Xi Jinping, to clean-up public office.

Besides weaker economic growth, the pork market slowdown is down to “the fight against corruption reducing the number of official banquets”, the USDA bureau said.

The impact of the measured has been evident “particularly at high end hotels and restaurants”.

‘Main protein source’

However, a Chinese population that “is still growing and becoming more urbanised will support overall pork consumption”, the bureau said in a report.

“Pork is still the main protein source for many Chinese consumers, and consumption will continue to increase as the population continues to grow, albeit a slower pace.”

Chinese pork prices as of May were, at 23.13 yuan a kilogramme, 6.6% higher than a year before, a third successive month of increase after 15 months in a row of falling prices.

Growth in imports

The recovering pork prices are, besides reviving hog producer profitability prospects, encouraging imports of the meat too, which the bureau pegged at a record 830,000 tonnes next year, up 30,000 tonnes year on year, extending a long-term increase.

“The price gap between domestically produced pork and imports can be as much as 50% reflecting the high cost of production as result of limited land and increasing labour costs.”

The increased level of imports, which a decade ago stood at 48,000 tonnes, is being sourced mainly from the European Union, which has a 70% share of Chinese purchases, with the US disadvantaged by its use of growth promoter ractopamine, on which China operates a zero tolerance policy.

Beef boom

Chinese imports of beef will grow too next year, by 50,000 tonnes to a record 600,000 tonnes, supported by tight domestic supplies of cattle for slaughter, at a time of growing taste for the meat.

“Beef consumption will remain firm in 2016, supported by increasing incomes, continued urbanization and increasing consumer preference over pork,” the briefing said.

Australia will, despite higher prices, remain the main origin for China’s beef imports, “a position bolstered” by a recent free trade agreement.

China’s meat dynamics are of huge significance to world farming, not just through determining its need for imports, and so having a big impact on prices in exporting countries, but also its requirements for crop imports too to keep its huge hog herd in feed.

While the country has huge supplies of corn, their relative expense has encouraged imports of feed grains, notably barley and sorghum, which are not subject to import quotas.

And with China importing well over 80% of the soybeans required as a source of soymeal, a higher protein feed ingredient, its needs have a big influence on whether farmers in Americas sow the oilseed or corn – in turn affecting grain markets worldwide.

(Source – http://www.agrimoney.com/news/chinas-hog-herd-to-expand-for-first-time-in-four-years–8822.html)

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