China pork market: holiday demand lifts prices amid tighter supplies

Key points:

• Pig supplies remain tight as sow inventory declined 6.9% year-on-year
• Both wholesale and liveweight prices were supported in June following the national Dragon Boat festival
• Imports of pig meat excluding offal nosedived 48% year-on-year
• Imports of offal continue to grow with volumes up 2% year-on-year

Supply

According to the Ministry of Agriculture and Rural Affairs (MARA), the number of sows has declined by 6.9% year-on-year to 39.86 million as of the end of February, resulting in a tightening of fattening pig supply. There has been significant liquidation of sows due to disease outbreaks and financial pressure, with some further decline in the sow heard anticipated amid liquidation of smallholders.

In the latest forecast, the Food and Agriculture Organisation of the United Nations (FAO) has estimated global pigmeat production to decline year on year by 0.9% in 2024. This is primarily due to decline in Asia of which China is the major contributor.

Prices

Wholesale prices in China began the year with a steady note, however holiday demand has provided some uplifts, such as Chinese New Year in February and the Dragon Boat Festival in June.

In June the wholesale pork price peaked at 24.8 yuan per kg on 18 June after trading in the range of 20-22 yuan per kg over the previous three months (March-May). The average price for the year so far (Jan-Jun) sits at 21.3 yuan per kg, up 3% compared to the same period last year.

Chinese liveweight pig prices (source: pig333.com) have also echoed the positive tone in recent weeks. Prices at the end of June were sitting around 18.4 yuan per kg, up from 16.7 yuan per kg at the end of May. It has been commented that strong weaner pig prices have been supporting the liveweight prices.

For the remainder of the year, prices are anticipated to be more volatile with a positive bias as supplies remain tight and relatively stable consumption is expected.

Imports

Overall Chinese pig meat imports are in decline for the year to date (Jan – May), but it remains a two-sided story. Volumes of pigmeat excluding offal have nosedived by 48% year-on-year to 423k tonnes. This is the lowest volume recorded since the ASF outbreak in 2018. However, on the flip side imported offal volumes continue to grow, up 2% year on year for the period, to 474k tonnes.

Higher domestic inventories of frozen product are reportedly driving lower imports. Market interference is common practice in China. The Chinese government keeps a reserve of frozen pork to ensure supply and price steadiness.

Despite volumes falling substantially from all key trading partners, the EU27 remains dominant, holding a 47% market share. Spain has retained its position as the largest individual country exporting pigmeat excluding offal to China, while Brazil is a close second. Brazil continues to hold a competitive advantage of lower prices on the global market. 

Looking specifically at the offal category, the EU27 also continues to dominate Chinese import volumes with a 51% market share. However there has been some change seen in individual countries. The US and Spain remain the largest exporters, but the Netherlands and Denmark have lost market share to Canada.  

Volumes imported from the UK follow the same overall trend. Imports of pig meat excluding offal have declined, while offal has increased with the UK holding a 5% market share of both categories.

A key watch point for the global market is the recent and widely reported development of an anti-dumping investigation by China into imports of EU pork. The increased tensions could have major repercussions if it results in trade restrictions between the two nations. The volume of pig meat looking to find a new home on the global market would be significant and would likely trigger falling prices as the market adjusts. Exports of offal and fifth quarter currently help generate a higher value for the whole carcass with China taking in product that has limited demand elsewhere.

Demand

According to the latest Rabobank report, GDP growth in China remains lower compared to the previous year, although economic conditions are said to be improving. Consumer confidence is gradually improving, but many consumers remain wary of spending amid the higher cost of living and so continue to look for more affordable cuts. However, national holidays continue to provide some seasonal uplifts with the mid-autumn festival coming at the end of September and National Day break in October.

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