February 17, 2012

China's pork imports rise strongly in 2011

According to reports, Chinese fresh and frozen pork imports were 134% more in 2011, as compared to 2010, with increases recorded from most of the key exporting nations.

China's economy has grown at about 8% per year over the last two decades. Increasing incomes have led to a changing food consumption pattern, in particular, an increasing consumption of meat. Pork has historically been the primary animal protein source in Chinese diets, and its consumption level has increased significantly.

Similarly, Chinese pig production has increased over the past 20 years at an average rate of 2.1% per year. However, at the same time, production costs have also risen, squeezing profit margins from many backyard producers despite relatively high pork prices. In 2011, pork production in China declined by 3% as low prices through the first half of 2010 caused several smaller producers to leave the industry. In addition, producers were faced with unusually severe and persistent outbreaks of animal diseases, such as FMD, PRRS and pig epidemic diarrhoea in piglets in late 2010 and early 2011.

Imports of pig meat have risen dramatically to fill the resulting supply gap. Official trade figures indicate that Chinese imports of fresh and frozen pork were up 134%, as compared to 2010. The average price of imports was up 65% due to a combination of rising prices and an increasing share of costlier cuts.

In May 2010, the US resumed exports to China following the lifting of trade restrictions on pork associated with A-H1N1 influenza. This enabled the US to account for over half of all pork imports in 2011, compared to just 15% the year before. According to Chinese data, some of this rise came at the expense of Denmark, whose shipments declined by 17%. However, this contradicts Danish trade figures which show increased shipments, albeit from a lower base. Other EU member states shipped increased quantities, particularly Spain, France and Germany. Overall imports from the EU increased by 24% compared with 2010's levels. Canada was the other major supplier of pork to China and its shipments increased by 27% in 2011.

Similarly, the total volume of offal imports to China increased by 26%, compared with a year ago. This coincided with a 23% increase in the price of offal imports. Again, the growth in offal imports was mainly made up of increased shipments from the US. This was partly offset by reduced volumes from Denmark and Canada, previously the two largest suppliers, although this contradicts the trends recorded in those countries' trade data.

Fuelled by increased prices, China's pork producers have steadily expanded the herd size during 2011 and this will help boost pork output in 2012 according to the USDA's forecast. In addition, production growth is also being supported by China's decision in July 2011 to resume a RMB100 (US$15.60) per sow subsidy and introduce other policies to encourage herd expansion. Nevertheless, imports are likely to continue to grow in 2012, fuelled by relatively strong economic growth and continued firm demand for pork. Additional countries will have access to the Chinese market during 2012, including Brazil and more EU nations.