May 24, 2005

Will high pork prices in China be sustained for long? 

Hog farmers in China have made handsome gains from high pork prices of the past two years. The questions now being asked are: How long can the market sustain such high prices? And how will hog farms and farming households react to any downward revision in prices?

According to Cheng Jianguo of the Shandong Academy of Agricultural Sciences, firm live hog prices in the first half of this year have helped earn strong profits for farmers. Such high pork prices have been attributed to the following:

• Hog diseases have severely impacted the live hog farming industry, cutting supply and propping up prices. In recent years, more cases of disease among breeding sows have meant fewer piglets, while infections have also lowered the survival rate of remaining piglets.
   
• China's live hog industry is currently making the transition from small-scale backyard to large-scale commercial farming. At present, there are fewer backyard farms while the number of commercial hog farms has risen. High hog prices have provided the incentive for improved hog farming and better farm planning. Hog breeding cycles were also lengthened to take advantage of these high prices, prolonging the peak season in live hog production.
   
• Improved living standards have boosted demand for pork. In addition, prices of key feed ingredients like soymeal and corn have remained stable in recent period.

Hog prices in the next 12 months, said Cheng, will follow a likely pattern of "boom-trough-boom" - high in January and February, falling in May to July and rising again in October. This is closely linked to consumption patterns that follow the four seasons and major festive periods.  

Based on this trend, prices are likely to fall in the second half of the year from high levels of the past two years.  However, the commercialisation of hog farming and greater government support through rural development policies may cushion any price fall in 2H 2005.

Experts have advised that in order to reap maximum returns, hog farmers should start planning for production according to these market trends. During periods of relative market inactivity, farmers should seize the opportunity to build or extend their farms, buying piglets and raising breeding stock.

On the other hand, in a peak or downturn scenario, farmers should consider slaughtering old boars and raising more fat hogs in the shortest time possible, by varying the mix of feed according to current prices of hog and feed ingredients. Doing so will lower production costs and improve profits.