March 3, 2023

 

A rollercoaster ride for China's pig prices in 2022    

 

That the price of China's pigs has a fluctuating cycle every few years has become a common understanding.

 

In Q3 2022, the price of pigs was still stable with an upward inclination. Entering the fourth quarter, the price of live pigs climbed from ¥‎24.65/kg to ¥‎28.80/kg by mid-October. Without warning, it plunged dramatically into a downward cycle. By the second week of January 2023, pig prices dropped to ¥15.38/kg

 

The rapid industrialisation of China's pig production did not temper the fluctuation cycle of pig prices. Several factors are responsible for this development.

 

Last year, there were 25 pig producers with 100,000 sows in China, seven producers more compared with 2021. Additionally, there were 100 producers who kept between 10,000 and 100,000 sows. This resulted in strong competition amid excess pig production, leading to volatile prices.

 

The tussle for profits between Chinese pig producers and the slaughter sector had also exacerbated the situation. China has yet to establish a highly cooperative pig breeding-slaughter integration. Consequently, last December, as the price of pigs plummeted, the monthly average pork-to-pig ratio of slaughterhouses (the price ratio of pork carcass to live pigs) is as high as 1.55:1, higher than the break-even level of 1.35:1.

 

Another factor for price fluctuation is pig producers' intention to push up prices. In the first half of 2022, with the price of pigs falling, the average price of pigs released was only ¥14.55/kg, while the cost of production was as high as ¥18-22/kg. The recovery of pig prices in the third quarter helped producers to regain profits, but poor performance in the first half of the year resulted in deficits in the third quarter. This prompted producers to hold back releases in early October, thus pushing up pig prices.

 

As pig prices rose steadily in Q3 2022 and early October, pig producers held back releases of finishing hog, given the potential, stronger demand toward the end of the year. But, demand for pork was much weaker than expected. After November, pig producers were compelled to release finishing pigs that were too large, resulting in a sharp rise in pig supply and, eventually, a rapid price tumble.

 

The price of pigs in China has become increasingly difficult to project.

 

For now, pig producers can only focus on reducing the cost of pigs to survive the challenging times ahead.

 

- SHI TAO