China's pork and pork variety meat imports reached record volumes in 2015, overcoming the hurdles of a hampered economic progress and weakening demand for commodities, according to the US Meat Export Federation (USMEF).
December imports into China / Hong Kong amounted to 224,000 tonnes, a 20% year-on-year rise. The figure boosted imports for the full calendar year to 1.937 million tonnes, an increase of 8%.
The EU is the biggest pork supplier to China, with about 70% market share. Following the approval of US plants to export to China, US exports began to pick up towards the end of last year. This led to the largest volume of US pork / pork variety exports to China / Hong Kong - in close to two years - in December; the volume swelled significantly by 27% year-on-year to 33,691 tonnes.
In the entire 2015, US exports to China / Hong Kong rose slightly by 1% higher in volume (339,056 tonnes) but dropped 10% in value at US$700.4 million compared to 2014.
These results were still down 4% in volume and 22% in value from 2013, and much lower by 30% and 23%, respectively, from the 2011 peak.
With the Chinese market closing for the Lunar New Year, concerns lingered over prospects following the end of the holiday when consumptions tend to dip.
China's live hog prices continued to rise through the third week of January, increasing 37% year-on-year at 18 RMB/kg (US$1.24/lb).
Prices are partially supported by the seasonal holiday demand and cold weather. Piglet prices have soared, up 74% from a year ago to US$2.31/lb, reflecting strong profitability in the industry, and thus demand for feeder pigs.
Live hog and piglet price trends are similar to 2012, following declining production and the subsequent price spike in 2011.
Consequentially, the declining Chinese breeding herd over the past year has also constrained piglet numbers.
China's corn prices recently slid 13% year-on-year to their lowest level since 2011, but still averaging more than US$8 per bushel, based on the official Ministry of Agriculture data.
Combined with higher hog prices, the hog: corn ratio was 8.58:1, revealing the highest profitability in recent times and boosting expectations for a rebound in production by mid-year.
However, there is yet to be a unanimous view on how fast the industry can ramp up production with new environmental regulations obstructing expansion plans, especially for larger operators.
In the meantime, the spread between US and EU hog prices and China's prices remains historically wide, with Chinese prices staying nearly three times as high as US prices since December. This could suggest future opportunities for US exports, but wholesale prices for EU pork cuts in China remain extremely competitive.
Additionally, the wholesale market was relatively calm as the Lunar New Year holiday nears. Buying of imports continued as imported pork is clearly a value compared to domestic product.
China's wholesale prices for imported variety meats were mixed in the first part of January, with higher prices for feet and stomachs while ear prices were significantly lower and tongue prices eased. Importers are hedging on continued devaluation of China's currency, which could further impact pricing.
For the Chinese pork production, 2015's output went down by 3.3% from 2014, to 54.87 million tonnes, based on data from the National Bureau of Statistics.
Small hog farms also suffered the impact of implemented environmental regulations, with several shutting down last year. As a result, both sow and live hog inventories shrink.
At the same time, China's industry continues to improve its efficiency, in a shift towards more modernised commercial productions.
- US Meat Export Federation