October 7, 2011

 

 

China's pork imports are projected to rise 8% to 480,000 tonnes in 2012, as domestic hog production is growing slower than expected despite government's stimulus measures.

 

Surging pork prices, reflected in a doubling in piglet prices on-year to RMB34 (US$5.40)/kg, have become China's top policy concern, USDA attaches said.

 

Chinese authorities have lifted subsidies in an effort to revive the domestic pig industry, such as resuming subsidies of RMB100 (US$15.60) per sow.

 

However, producers' response to incentives is muted, thanks to high feed costs, with corn prices topping RMB2,400 (US$376)/tonne on the Dalian futures exchange last week, high wages and concerns over outbreaks of diseases such as swine blue ear disease to which the industry has been prone.

 

"Small producers also fear another cycle of oversupply and low prices in the future," as happened early in 2010, when overcapacity prompted a market slump and large culls sowing the seeds for the current supply squeeze.

 

Meanwhile, the large-scale operators that the government is particularly keen on encouraging reported that difficulties in acquiring additional farmland are hampering their expansion plans.

 

The setbacks means that hog inventories may not recover to their levels of early 2010 next year, the attaches said.

 

Indeed, they forecast the Chinese swine herd, which accounts for more than half the world total, declining further in 2012 to 437.9 million head, down by nearly 20 million in two years.

 

The continued supply squeeze looked set to support "higher-than-normal prices" for hogs in 2012, besides prompting a larger reliance on imports of pork, China's staple protein.

 

China's pork imports will likely hit 480,000 tonnes in 2012, second only in size to those in 2008, when a disease outbreak saw China turn to external markets for supplies.

 

Including offal imports, a larger market worth some US$1.2 billion this year, buy-ins will approach 1.2 million tonnes.

 

The report follows longstanding talks of rising Chinese pork imports after a period of strong purchases by South Korea and a foot-and-mouth outbreak. Demand for US output is high despite a mixed American market.

 

Chicago lean hog futures in August set a record, for a near-term contract, of 107.475 cents a pound, rising 30% on-year.

 

"Evidence of China's rumoured purchases of US pork products finally showed up in US export statistics," analysts said, noting a more than doubling to 44 million pounds in Chinese buys.