May 16, 2012

China's pork, hog prices may drop up to 20%

The hog and pork prices in China is seen to decline by 15-20% this summer compared with last year before rebounding in Q4 or the following quarter, Rabobank stated Tuesday (May 15).

Hog prices fell 3.7% in the first quarter compared with previous quarter, to US$2.59 a kilogramme. China's pork supply has begun to recover from a decline in 2011, notching 3.8% growth in the first two months of 2012 compared with the same period last year.

A rise in sow inventories has offset a slowdown in broader hog inventories in the three months from December, Rabobank said in a research note.

Producers have increased herd replenishment rates, even as "the disease situation [that had affected the hog population] is abating," Rabobank said.

Gross margins are shrinking for hog farmers due to falling hog and pork prices and higher feed prices.

Hog prices have fallen 70% down on year and are 85% lower than the record US$120 a head posted in July 2011, Rabobank said.

"Small farmers will continue to leave the market due to cost pressure and expectation of higher market risks," Rabobank said. "However, due to the rapid expansion of large hog farms, the recovery pace of the hog supply will be only slightly affected by the departure of small farmers."