August 24, 2015


China's 'incredible' hog herd loss



Last month agricultural lender Rabobank focused, in its third-quarter report, on China's declining sow and hog herds, which was pressuring pork supply. "The enormous cull of China's herd over the last 18 months is pressuring production, pushing prices up and industry margins into the black", the agricultural lender then said in that report.


This month, the Dutch bank issued a special report reiterating its earlier report with the screaming title "China's Incredible Shrinking Hog Herd … and the Countries Happy to Fill the Void". The word "incredible" to describe the shrinkage is apparently apt, as the report reveals that 2015 will see the world's second-largest economy's pork production declining by 3.7 million tonnes (equivalent to 6.5% of Chinese pork production), to 53 million tonnes.


During the first half of this year, pork production already dropped by an estimated 1.3 million tonnes, or 4.9%, the report said. The decrease in the second half is predicted to be almost double that of the first half, at 2.4 million tonnes.


Due to reduced margins, millions of small pig farmers have exited the industry, and the past one and a half years saw declines of nearly 100 million head in hog herd and 10 million in breeding herd. It's as if the US, Canadian and Mexican pork sectors all disappeared from the global supply in a span of less than two years, the report said.


The report described the herd decline over the last 18 months as "one of the largest culls in history", and said the "astonishing drop of the Chinese hog and sow herd will impact the entire global pork market in the remainder of 2015 and into 2016".


Pork's importance


For the Chinese people in China, pork is the most-loved meat. It is believed that the Chinese were the first to domesticate the pig out of the wild boar. According to the US Department of Agriculture, China is the most voracious pork eater, having consumed 50.1 million metric tonnes as of 2013. Far behind in consumption is the EU at 20.17 million metric tonnes and the US, 8.7 million metric tonnes.


With China's pork production expected to decrease by 6.5% for the whole of 2015 which, according to Rabobank, is the third-largest decline in the last 40 years, China has to fill the gap with a 600,000-tonne increase in imports in the second half.


One man's loss is another man's gain. The EU, US and Canada are well positioned to fill China's increased import needs, according to the Rabobank report. While the Chinese's pork consumption has significantly declined (by an estimated 3.1 million tonnes, or 5.3% from 2014) along with production, Rabobank says pork imports are nevertheless expected to increase to 1.9 million tonnes in 2015, since imports have been observed to have strengthened their foothold in China.


The Rabobank report noted that in 2012-2014, despite more than sufficient supply, the pork import level did not decline. "This suggests that part of China's frozen pork supply, which is largely for further processing, is already dependent on foreign production due to lower prices, and consistent quality and supply…."


In fact, Rabobank expects China's pork imports to escalate to "a new level" after 2015 and 2016, which "will impact the global trading pattern in the long term." Thus, China, Rabobank adds, "will play an ever-increasing role in absorbing global supply, particularly frozen by-products and frozen pork meat". -- Rick Alberto

Video >

Follow Us