January 26, 2021

 

A fresh, post-ASF start for China's pig industry in 2021?

 

 

In an otherwise tumultuous 2020 best known for the COVID-19 pandemic, China had begun to emerge from the impact of African swine fever (ASF).

 

The country's Ministry of Agriculture and Rural Affairs reported there were about 340 million heads of live pigs at the end of June 2020, an increase of nearly 30 million heads over the end of 2019. Towards that period, there were five straight months of recovery for the supply of live pigs and piglets, while the number of sows rose for nine consecutive months, a 28.6% increase compared with September 2019.

 

The sector's recovery was thought to last until 2024, but latest Chinese figures showed rapid recovery as "Chinese pork production (in Q3, 2020) was 18% higher" than 2019, and the higher production "continued in October," Pig Progress's Kees van Dooren wrote in a December 2020 report.

 

He highlighted that China's pig herd this year could grow to 80% "of the number of animals before ASF struck in August 2018."

 

One recent sign in the market also hints that Chinese pig producers are finally getting back to their feet to a fresh start in 2021. On January 11 this year, Reuters reported the tumbling of China's newly launched live hog futures to reach limit down on their second day of trading on the Dalian Commodity Exchange due to the expected growth of the Chinese hog herd "as new farms start up."

 

A senior analyst with Sinolink Futures commented that "it is the industry consensus to go short on the futures, to hedge, as the market expects pork prices to fall sharply this year."

 

So what helps to prop up China's pig industry for its recovery from its ASF gloom? One key factor can be attributed to the industry consolidation that came in the wake of the outbreaks.

 

As noted by Fitch Ratings, consolidations have accelerated during the period, with major hog breeders increasing capital spending to enlarge their market share. "Leading breeders, with strong operational efficiency and financial capability, have taken the opportunity to build additional capacity, while small and inadequate breeders exit the market," the US credit rating agency said in a September 2020 commentary. That would help explain the more than €25 billion amount (as estimated by Rabobank) invested last year in China's pig farming. 

 

Furthermore, Chinese authorities were said to have played their part as local governments were ordered to provide financial incentives for pig farms to get productions up to standard, Van Dooren wrote.

 

Still a long road to pork self-sufficiency?

 

Those developments show that Chinese pig producers could put most of their troubles with ASF behind this year. However, whether China is anywhere closer to its goal of sufficiency in pork production (a target that is set at 95%) is anyone's guess. Already, it has aimed for 85% of all local hog farms to be large scale by 2030.

 

What could cause parts of the plan to collapse is another reemergence of ASF that the Chinese government could not respond adequately in time. Even now, it is exhorting producers to "expand the (pig) herd quickly" as the disease remains in China, and "in the face of record-high feed prices," said commodity broker Dennis Smith in a National Hog Farmer article last December.

 

He opined that Chinese per capita consumption of pork "will take years" to recover "towards the 2018 level of 88lb" even as "prices eases downward".

 

Additionally, it is common knowledge that China is highly dependent on pork imports from overseas given the significantly huge appetite of its residents.

 

As highlighted by Angela Zhang, head of business intelligence at IQC Insights, "China's pork import market went higher in the first half of 2020," following an upward trend in 2019. The country brought in "2,074,128 tonnes of pigmeat and 656,344 tonnes of pork offal in total" during January-June 2020, despite COVID-19 and "weak pork demand especially in the foodservice sector," she said.

 

In the meantime, observers would be watching how the new US government under President Joe Biden would affect the US-China pork trade. Zhang noted that the United States was the "biggest winner" among global pork exporters to China during the first half of 2020.  

 

While China's goal of pork self-sufficiency currently seems lofty, it looks like its pig industry can at least expect a fresh start in 2021.

 

For now, the industry appears less perturbed by ASF compared to the past years.

 

- TERRY TAN / eFeedLink