China Pork Price Inches Up as Heavy Rain Hit Top Producing Region, By Jim W. Huang

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Heavy rain pounded China’s central province of Henan in the past four days. At least 25 people were killed, and over 100,000 people have been forced to flee to safe ground.

The hardest hit area was the capital city of Zhengzhou, home to 12 million people. From Saturday to  Tuesday, 617.1 mm (24.3 inches) of rain fell in Zhengzhou, almost the equivalent of its annual average  of 640.8 mm (25.2 inches), according to Xinhua News.

Heavy rain caused flooding of a subway line on July 20. Dozens of passengers trapped in railcars in  waist-high water for hours before getting rescued. More rain is expected to fall in the next three days.

I have been to Henan over a dozen times. At least five of CACDA employees were from the province.  I am praying for the safety of my friends, coworkers and all the citizens in Henan during the time of  natural disaster.

Henan is China’s largest hog producing province. In 2019, it has hog stock of 31.7 million, accounting  for 10.2% of national total. Muyuan, China’s top hog producer, and Shuanghui, the country’s largest  meatpacker, are both headquartered in Henan. In the first half of 2021, Muyuan sold 17.4 million hogs nationwide. The Company is well on its way to meet annual sales target of 35-40 million hogs this  year, tripling its 2019 production. Would the worst storm and flooding on record cause serious  interruption of Henan’s hog production, and potentially, pork supply shortage in China?

Based on market data tracked by CACDA, China’s national average live hog price is RMB 16.3 per  kilogram today (equivalent to $1.14 per pound), up 4% from July 18. How much of the price hike is  caused by Henan flooding, and how much higher could it go?

To understand the cause and effect, we take a look at the recent rainfall map provided by China  Weather Service. As we can see, heavy rain (denoted in red, pink and dark blue color) is concentrated  in northern part of Henan province.

Fortunately, the hard-hit Zhengzhou metropolitan area is NOT a major hog producing region.  Environmental regulations in recent years pushed hog production out of densely populated large cities,  and into rural agricultural regions.

Below is a map of Henan Province. Muyuan has its headquarters and main hog production facilities in  Nanyang City, in the southwestern part of the province. Shuanghui is headquartered in Luohe City, in  central Henan.

In a recent telephone interview, a Muyuan spokesperson said that the Company is closely monitoring  the flooding situation. However, rainfall in Nanyang City is not severe, and its hog production operation is not affected.

According to data released by Henan’s provincial statistics bureau, hog stock is concentrated in central  and southern part of the province. Zhengzhou had 720K hogs at the end of 2020, accounting for only  2% of Henan’s hog production.

It is my conclusion that the Henan flooding has not seriously disrupted China’s hog production. The  recent price rise is transitory, mainly caused by interruption of road and rail transportation. As long as  they are repaired before the peak meat consumption seasons in September/October, Henan flooding is  unlikely to alter the current phase of hog price cycle.

Have a great week.