China pork prices to hike; demand unaffected by AH1N1

Pork demand in China--the world's largest producer and consumer-- is unlikely to be affected by AH1N1 in the long term and prices are seen to recover in the third quarter.

 

Ben Baoke, executive vice president of Zhongpin -- China's fourth-largest pork producer-- said despite a dip  in both pork prices and demand in the first week after the news of the outbreak, both demand and prices have recovered to levels prior to the outbreak.

 

Hog futures in Chicago jumped 5.2 percent in the last two sessions on speculation that demand will rebound after the AH1N1 outbreak pulled down prices of meat. China is battling to keep the virus from entering its borders after it infected 1,893 patients in 24 countries, killing 31 people.

 

Tian Feng, an analyst at BOC International (China) Ltd., projects China's pork consumption won't see much of a decline as consumers are unlikely to change their diet. The analyst also noted that "the initial fear of eating pork has also dissipated now that they know the virus has little to do with pigs."

 

No cases of AH1N1, have been confirmed in humans in China. There also hasn't been any mutated strains found among its pigs, Gao Hongbin, the vice agricultural minister, said April 30 in Beijing.

 

Ben said prices may possibly climb in the third quarter as China consumed about 43 million tonnes of pork and pork products last year. The consumption this year "will not decline from the 2008 level,'' he said.

 

Chinese consumers realise they will not contract the virus by eating pork, Ben added.

 

Still, Yao Minpu, vice chairman of Charoen Pokphand's China subsidiary was quoted by the 21st Century Herald on May 5 saying that AH1N1 may reduce China's pork consumption by as much as 20 percent.

 

Pork prices in China "have been on the decline since the fourth quarter last year despite a small rebound during the Lunar New Year holiday in January this year," Ben said.

 

Nationwide wholesale pork prices slipped more than 22 percent to 14.73 renminbi per kilogram in the first week of May since late January, capping 14 weeks of decline, according prices supplied by the Ministry of Commerce.

 

Meat prices may rise from the current "historically-low" level as pork remains the primary source of protein for the Chinese population, the world's largest, and the government may boost prices by stockpiling the meat, Ben added.

 

 

According to Ben, hog farms in China are having a hard time as some are struggling to breakeven while others started to suffer losses. China's economy grew at the slowest pace in almost 10 years in the first quarter, forcing many as 30 million rural migrant workers out of jobs.

 

Ben also added the government is monitoring the market situation to assess the possibility of stockpiling. It will start considering stockpiling the meat if live hog prices fall to below 5.5 times the cost of corn, a major ingredient in animal feed, he said. The ratio is currently around that level, he said. The government has yet to begin stockpiling.

 

Zhongpin is one of the companies the government might select to stockpile meat as the company has up to 20,000 tonnes of spare refrigerated warehouse capacity, he said. The company slaughtered 2.5 million pigs last year and produced about 240,000 tonnes of pork and pork products, the executive said.