February 1, 2008

Inventories signal improvement in China's live hog production by Q2 2008

Sow and piglet inventory are on the rise in China and live hog production should see a pulpable improvement after the second quarter, Chen Weisheng, vice director of the agricultural livestock ministry told Xinhua, China's official news agency.

December 2007's live hog inventories grew 6.5 percent on-year while sow inventories grew 9.4 percent. Live hog inventories among integrators grew at a blistering 20.6 percent.

Pork prices have stablilised in recent weeks and some areas have seen a gradual decline. However, they are still high in general, Chen said. 

Since the numbers are already in the inventories, whether pork prices would be coming down would now largely be dependant on feed costs, if feed costs were to rise, it would be unlikely for pork prices to come down; conversely if feed costs drop, there would be a gradual decline in pork prices, he said.

Chen offered a few reasons for the rise in recent pork prices and why it is unlikely to drop in the immediate future. 

Pigs have a longer gestation period. It takes about a year from the restocking of breeding sows to the period when the litter it gives birth to would be ready for market, he said. Furthermore, last year's rise in consumption has led to a failure for pork production to catch up. Another reason was the rise in feed costs, in which corn, for example, rose 16.7 percent on-year. The rise of oil prices and recent bad weather in the south has lengthened the transport time for live hogs. A rise in transport times means high mortality, in additon to higher fuel charges, all of which would prop up pork prices.

China's authorities last year introduced a series of measures supportive towards pig farming and conditions are improving. The government has subsidised the farming of 46.9 million sows ( China has a pig population of roughly 500 million) and insured 31.3 million. It has also subsidised artificial insemination for 9 million pigs.

The government also provided subsidies for vaccines and culling. These initiatives have played a critical role in the prevention and control of blue-ear disease and other pig epidemics, he said.

Under these policy measures and market demand, live hog production has staged a gradual recovery since September, leading to the growth of live hog and sow inventories.