July 24, 2024

 

Consequence of bloated pig inventories hits Chinese producers hard

 

According to Wang Zuli, a specialist from the country's Agriculture and Rural Affairs Department, a major factor causing falling prices was the excessive capacity of pig production. While Chinese sow inventories have been trimmed,  those cuts have not been substantial.

  

efeedlink's statistics show that the number of productive breeding sows was 41 million heads between September 2022 and August 2023 — within the national sow stock level. The reason why pig producers maintain high sow inventories (despite tumbling pig prices) is the fundamental change in their farming model following the African swine fever outbreak.

 

By the end of 2023, industrial farms account for 68% of China's pig production, compared with 21% in 2017.

 

Last year, the combined pig release volumes of the 20 biggest producers totalled 198.68 million heads, which was over a third of China's total pig production of 560 million heads that year.

 

Meanwhile, the combined sow inventories of these top 20 producers (which are mostly integrators) in late 2023 was 9.18 million heads, accounting for almost 25% of the country's sow population.

 

The combination of high sow inventories and falling pig prices have dragged producers into severe deficits. As such, in March 2024, the Agriculture and Rural Affairs Department cut the national sow stock level from 41 million heads to 39 million.

 

Additionally, starting in September 2023, the quantity of China's productive mother pigs dropped below 41 million heads, reaching a low of 37 million heads by late 2023. Then, from January to April 2024, the number of productive sows increased to over 38 million heads.

 

As its sow population decreased, China's pig release volumes between January and April 2024 diminished by 7.21% while pig prices averaged ¥14.84/kg. Additionally, pig production costs have dropped in the period as was also the case with feed ingredient expenses which were lower by ¥1.30/kg on-year.

 

Meanwhile, China's pig supply is set to shrink amid lower sow inventories during H1 2024. Although pig prices are unlikely to rise to 2022's highs, surging above the lows of 2023 is a possibility. With production costs falling by ¥1.50/kg (), Chinese pig producers are expected to enjoy substantial gains in the latter half of 2024.

 

- Shi Tao, eFeedLink