October 29, 2003
China's Hog Market Analysis: Substantial Rise in the Procurement Prices for China's Slaughter Hogs in August and September
An eFeedLink Exclusive Reports
Since the end of July this year, the market supply for slaughter hogs in China has slackened, with tight supply evident in various regions, and procurement prices varied by different extent. Retail prices for pork have also risen substantially. It is apparent from developments in various leading production areas that the off-peak season for slaughter hogs this year will be unlike those of previous years.
Tighter Slaughter Hog Supply in Some of the Production Regions; Substantial Price Increases
In China, supply of slaughter hogs is essentially seasonal. It is usually lower in August, during which temperatures are high. Moving into September, supply subsequently and gradually increases. The conditions this year, however, are exceptional.
By September, slaughter hog supply was still tight, and prices were still high. According to news from some of the leading production regions, procurement prices in the four provinces of Anhui, Zhejiang, Hebei and Henan for the month of August were RMB3.25, RMB3.45, RMB2.95 and RMB2.84 for every 500 grams respectively, a corresponding increase of 20.4%, 11.95%, 7.29% and 14% compared to the same period last year.
Data from Hunan province showed that hog inventory for the province since late July has been rather stretched, with slaughter hogs procurement prices rising gradually, such that they hit RMB3.24 for every 500 grams in August (RMB2.82 in August 2002), and RM3.65 in September (RMB2.85 in September 2002), which was an increase of 14.9% and 28.1% respectively from the same period last year.
In the city of Changsha, September's fresh pork prices were RMB7.00 for every 500 grams, an increase of 27.3%, compared to the month of July. The increase has aroused much concern among consumers.
Based on the same breed, quality and meat specification, the retail prices for pork in Shanghai in late September -- using large ribs, small ribs, ham and thigh meat as four representative products -- rose by 16.7% versus the prices in late June, and increased by 8.5% compared to the prices in late August.
Pork in Shanghai area has always been sold in parts. This coupled with the inconsistent quality and meat specification, due to the wide range of slaughter hog variety available, consumers are generally cushioned from any impact of price changes, so that market supply on the whole still remains stable.
Main Reasons for the Rise of Hog and Pork Prices:
Price changes are an aggregate manifestation of the supply and demand relationship of a commercial product. Varied factors, such as seasonal demand and others, explained the recent rise in hog and pork prices in China. The main reasons for the rise of China's hog and pork prices since late July this year were as follows:
1. The Effect of an Unusually Hot Summer:
Since mid-summer this year, some of the provinces in China have been besieged by unusually hot weather. Take the case of Shanghai as an example. The intense heat of the summer has three characteristics:
- Firstly, higher temperatures are arriving earlier. High temperatures of over 35oC have been recorded as early as from June 30, two weeks earlier than in previous years;
- Secondly, temperatures have been unusually high. On July 25, 39.6oC was recorded, which was the highest in 60 years;
- Thirdly, the hot weather also last longer this year. This year alone, Shanghai recorded 40 days for which temperatures exceeded 35oC -- 3.4 times more than the average in past years (9 days), and 1.7 times more than last year (15 days), breaking the record in last 50 years. More provinces also recorded relatively higher temperatures, compared to the average temperature in summer each year. The month of August has always been an off-peak season for the sale of slaughter hogs; the unusually hot weather only worsens and prolongs the off-peak season.
2. Some Production Regions Severely Affected by Calamities:
Since the beginning of this year, certain parts of China have had crops damaged to different extents, due to dry spells and water logging, with damages more severe in some provinces. According to the information released by the Ministry of Civil Affairs in China, natural calamities have affected a total of 50.7 million hectares of crops this year, claiming 31.57 million hectares, and completely destroyed 6.65 million hectares of crops. The calamities resulted in economic losses of RMB151.42 billion.
A total of 156.3 million hectares of land in mainland China are set aside for crops. Based on the above figures, as much as one-third (32.4%) of China's total crop acreage was hit by the calamities; one-fifth of the total crop acreage was largely destroyed (20.2%), and one-twenty-fifth was completely decimated (4.3%) by the calamities.
The severe damages on crops also affect the development of the livestock industry. News in Anhui province reported that since this year it has been besieged by frequent calamities, particularly in the months of June and July, when torrential rains caused the Huaihe River to flood its banks, causing severe damages to properties and livelihood of more than 27 million people in over 30 counties. A total of 2.32 million hectares of crops were affected, and 640,000 hectares were totally decimated. According to the Anhui Food Control Bureau, the overall number of hog inventory on hand in the province fell by 14.4% from the same period last year.
3. Slow Growth of China's Pig Crop:
In the last two years, progress in China's pig production has slowed down. At the end of 2002, the total number of hog inventory on hand was 463 million hogs, which was an increase of 3.6% over the past two years compared to 2000. Compared to 2001, the growth rate was only 1.2%.
Of the ten surveys reported in regular quarterly reports from other Chinese government departments, put up during the months of February, May, August and November, between the first quarter of 2001 and second quarter of 2003, three surveys showed marginal increase compared to the previous corresponding periods, while the other seven surveys all showed slight decline, compared to the previous corresponding periods.
Hunan province is one of China's key hog producing areas, accounting for nearly 10% of China's total number of hog inventory on hand. Hunan is not only reputable for the well known "Xiang Pig" pork variety, the province is also famous as a large producer of other quality swine products. According to Hunan's Food Control Bureau's August report, the number of hog inventory on hand fell by 8.8% compared to the same period last year. The number of hogs on hand continues to decline this year, breaking the lowest record in ten years. The recent upsurge in hog prices has become the highest in recent years.
Pork from Jiangsu, another of China's leading pork producers, is shipped to other regions in China. However, statistics from Jiangsu's Agricultural Department estimated that in end October 2002, there was a total of 17.38 million hog inventory on hand in the province, which was a reduction of 4 million hogs (less 3.9916 million hogs), or a fall of 18.7%, compared to the same period in 1997.
The off-peak season for slaughter hogs this year is going to be worse and more protracted. In view of this development, it is likely that the slaughter hog season this year will not be busy. The protracted off-peak season implies that the usually peak season in the fourth quarter will be shortened. This is also a reflection of the scare supply of slaughter hogs.
On the other hand, a moderate price rebound is beneficial, both for production and consumption. The price of pork has generally remained low, not conducive for stable hog production and development.
In recent years, the number of pig farmers in some provinces such as Jiangsu, Xiangjiang, Anhui and Hunan has been declining gradually. There is a pressing need to develop commercial hog farming to fill up the gap left behind by the backyard pig farmers.
However, big commercial hog farming necessitates substantial capital investment. Thus, a moderate pick up in hog prices is beneficial for the advancement of commercial hog farming, pork production, and for boosting the supply of pork.
