March 29, 2022

 

China's swine farmers switch to lower quality grain and sell assets to survive

 

 

Swine farmers in China are switching to lower quality grain for livestock feed and are selling off their assets as they suffer record losses because of rising feed costs and poor pork demand, Reuters reported.

 

Analysts said China's swine sector is likely to be affected by these losses until 2023, which will likely lower imports of soybeans and meat for a second year.

 

This follows a period of big profits for swine farmers following the African swine fever outbreak which spread across the country three years ago, slashing pork production and pushing prices for pork upward.

 

But as swine farmers steadily rebuild herds, demand for the meat has declined due to COVID-19 outbreaks that have closed down restaurants.

 

Now farmers face rising feed costs due to Russia's invasion of Ukraine increasing global grain prices.

 

Consultancy Shanghai JC Intelligence Co Ltd (JCI) said farmers face average losses of CNY 480 (~$75.42; CNY 1 = US$0.16) on each pig slaughtered last week. These losses are affecting the entire sector, from major corporations to small farmers.

 

Swine sale prices are averaging at CNY 12 (~US$1.88) per kg, which is half of 2021 prices. But costs remain above CNY 16 (~US$2.51) per kg for big producers.

 

China's swine industry has turned to affordable low quality substitutes to replace the best quality corn, as well as cutting back on protein-rich soymeal.

 

Soymeal futures have gone up 15% in March 2022 to CNY 4,428 (~US$695.17) per tonne, a record high on smaller than projected imports from Brazil. Corn has also increased to record levels.

 

Rosa Wang, analyst at JCI said based on government data, the country's swine herd is 5% bigger than needed at 42.9 million.

 

Major pork producers such as Guangdong Wens Foodstuff and New Hope Liuhe are expanding herds and increasing output.

 

Some companies have been forced to sell assets to raise cash. No.2 breeder Jiangxi Zhengbang is being supported by local government firms.

 

The Chinese government has urged banks to offer more credit as they are worried of meat shortages caused by a potential exodus of pig farmers due to huge losses.

 

Pan Chenjun, senior analyst at Rabobank, said weak pork consumption will pressure pressures, and only start recovering in the fourth quarter at best. But most analysts expect profits will not come back until 2023.

 

-      Reuters

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