May 10, 2013

China's pork prices down 6.5% in April

Following a fall of 5.5% over-year in March, China's pork prices fell 6.5% in April.

On a monthly basis, pork prices were down 6.1% in April, compared with 9.1% the previous month. Oversupply has been one of the biggest factors behind the decline in pork prices.

Bank of America's Ting Lu previously attributed the decline to four key reasons: sow breeding inventory being at historically high levels; no cases of swine flu affecting supply, despite the dead pigs found floating in Chinese rivers; pork demand being impacted by the government's crackdown on corruption, 'gift giving' and excesses that have hit the catering industry and high-end restaurants; and a decline in corn prices, a key feed grain for pigs.

Recently two farmers were arrested after they sold 40 tonnes of diseased pork over a three month span. The newspapers reported that they had been hired by Fujian province's government to dispose of pigs that had died from pseudorabies or the "highly infectious" blue-ear pig disease. It is unclear if instances like this or that of the dead floating pigs will have any impact on pork demand.

The hog-to-corn price ratio was already below the break-even level of six earlier this year. So, Lu does expect the excess supply to decline and pork prices to pick up again in late 2013.