March 11, 2024

 

Unpredictability of China's pig price movements a headache for major pig producers

 

In the past five years since China confirmed its first case of African swine fever in August 2018, its pig prices have fluctuated tremendously.

 

For instance, in 2022, the price of live pigs dropped from ¥16.61/kg at the start of the year to a multi-year low of nearly ¥12/kg in March. It then rebounded in April to ¥28/kg in October before plunging ¥17.01/kg by the end of the year.

 

From 2019 to 2021 following the ASF outbreak, China's pig price movements followed a three-year cycle; prices rose from low to high — fluctuating at high levels prior to retreating to low levels.

 

As pig prices climbed in 2019, pork production expanded gradually. Prices stayed firm at high levels in 2020, before sliding in 2021 and falling back to early 2019 levels by the end of the year.

 

However, price movements between 2022 and 2023 did not follow the usual market cycle. In early 2022, the rising prices of live pigs in Q2 seemingly heralded the initial stage of the conventional cycle. The rally, however, proved weak and prices failed to sustain. By the end of 2022, most gains were lost and prices remained low through 2023.

 

The biggest factor for the change in the three-year market cycle is an over-expanded pig industry. As pig prices skyrocketed during the ASF outbreak, major pig producers in China invested heavily to expand production capacity. Last year, the total release volume of 17 large pig producers totaled more than 146 million pigs.

 

The change is also partly due to the change in strategy of several small and medium pig producers in China. As pig prices stumbled to unprofitable levels, these players left the industry momentarily, resulting in a steady decline in pig numbers and leading to a rebound in prices. They later resumed production when prices rose to profitable levels, repeating the process as prices fluctuated.

 

Unfortunately, commercial pig producers who release several hundred to over a thousand pigs a year have to continue production due to their high capital investment.

 

For the large and mega-sized pig producers, whose investment is in at least the millions — coupled with high liabilities — quitting is simply not an option.

 

Furthermore, with the inevitable rise of industrialisation, 2024 will mark a contentious competition between major pig producers in China.

- Shi Tao, eFeedLink