September 27, 2010

China's pork industry rebounds on tight fundamentals

In the second half of September, pork prices in China rose 3.6% on-year to reach RMB12.60/kg, generating profits for breeding and slaughtering companies amid tight supplies.

According to the ministry of agriculture, hog inventories in August equalled 44 million head - an on-year decrease of 3.57%. Sow supplies are entering a tight situation with brood sow stock totalling 4.5 million head in August - down 4.9% on-year. As the fourth quarter is the peak season for pork consumption in China, pork prices are expected to trend upwards.

Currently hog and piglet prices are stable, but the rise in pork prices is relatively higher. The prices of hogs continue an expansion that will cause live-hog slaughtering and meat enterprises' profits to rebound substantially. Slaughtering enterprises have reported profits of RMB50 (US$7.47) per head from RMB10 (US$1.49) earlier on.

Due to China's tight supply of pork in the near future, and China's peak consumption season around the corner, pork prices will remain on a rising trend, creating a profitable environment for hog slaughtering and meat enterprises.