Pig herd size hits lowest level since 1992, pig prices continue to rise
Monitoring data from the Ministry of Agriculture and Rural Affairs show that on April 26, the average price of pork at national agricultural wholesale markets was 20.40 yuan per kg, up somewhat from April 17.
“Affected by factors such as frozen pork being released from storage in April and accelerated slaughter in some areas due to the epidemic, pig prices once underwent a correction, and later returned to an upward trend.” Zhu Zengyong, associate researcher at the Agricultural Information Institute of the Chinese Academy of Agricultural Sciences, told an Economic Daily reporter.
Zhu Zengyong believes that after African swine fever outbreaks recently occurred in Danzhou City, Wanning City and other places in Hainan Province, farmers and large-scale farms in southern sales areas generally lacked confidence in price rises, the enthusiasm for sending pigs to slaughter increased, and supply temporarily increased. In addition, some frozen pork inventories have recently been released from storage one after another, but terminal consumption remains weak, orders for pork products have declined, and most slaughterhouses have cut prices to sell. Although pig and pork prices had fallen somewhat earlier, the rise in piglet prices has not been interrupted. Monitoring data from the Ministry of Agriculture and Rural Affairs show that national piglet prices rose for 11 consecutive weeks, with a cumulative increase of 70.1%. This shows two things: first, the decline in breeding sows has led to insufficient piglet supply; second, enthusiasm for restocking for breeding has begun to recover.
As for the reasons for the overall rise in pig prices since the beginning of this year, Zhu Zengyong believes the fundamental reason is the decline in pig supply. Data from the Ministry of Agriculture and Rural Affairs show that in the first quarter of this year, the national pig herd was 375.25 million head, the lowest level since 1992; the cumulative slaughter volume of designated slaughter enterprises above a certain scale was 55.8261 million head, down 6.25% year on year. In January, slaughter volume rose 6.4% month on month and 6.3% year on year, but in February it fell sharply by 26.1% year on year, and in March it fell 3.2% year on year. This shows that the fundamentals of pig supply have declined, and the rebound in pig prices in February was mainly affected by insufficient supply. Starting in April, some frozen pork was released from storage and some areas accelerated slaughter due to the epidemic, causing a correction in national pig prices. The areas with more obvious corrections were Zhejiang, Liaoning, Fujian, Jiangxi, Henan, Hubei, Guangdong and Guangxi.
Industry experts believe that pig and pork prices will continue to enter an upward channel, based on the later decline in inventory, a further decline in pig supply and growth in consumer demand. Data from the Ministry of Agriculture and Rural Affairs show that the year-on-year reduction in the national breeding sow herd expanded from 5.9% in October 2018 to 21% in March 2019, and the decline in production capacity is expected to continue until the second quarter of 2019.
Affected by African swine fever, the circulation of live pigs has declined noticeably, and pig supply in some provinces will show a clear phased decline and become somewhat tight, thereby driving pig prices to continue rising in the second half of the year. Before National Day, frozen pork in storage will be released; after National Day, supply will decline noticeably, pork imports are expected to increase significantly, and at the same time consumption will enter its peak season, which will drive pig prices to new highs around New Year's Day and the Spring Festival, with the peak expected to be around 22 yuan per kg.
“Pig prices in the second half of 2019 are in an upward cycle, and the first half of 2020 will reach the peak of this upward cycle.” Zhu Zengyong said. For pig farmers generally, the good news is that pig prices will remain at a relatively high level over the next 3 years. Taking into account the increase in pork imports in 2019 and a certain degree of impact on pork consumption, the cyclical peak of pig prices is expected to be around 24 yuan per kg. Stimulated by prices, especially after June, restocking of three-way crossbred sows will increase, which will help production capacity recover in the second half of 2020, but affected by factors such as the decline in the sow herd, environmental protection policies and epidemic risks, the pace of capacity recovery will be relatively slow. In the second half of 2020, pig prices will gradually fall back from a high level, and are expected to enter a new round of the price cycle after 2021.