Lyle Jones, Genesus Director of Sales, China
Pig prices in China have resumed its upward trend resulting liquidation that began last July resulting in at least 10 months of decreased production capacity. Slaughter pigs closed Friday August 26th at 22.44 RMB/Kg ($1.47/lb.) increased by 4% month on month. The national average price for 15 kg (33lb) feeder pigs closed at 715 RMB ($104) each, but exceeded 900 RMB ($130) in some areas. Cull sows closed at 14.59 RMB/kg ($0.96/lb.) up by 6.3% during the same time period.
This recent rapid rise in domestic pig prices has also attracted the attention of the National Development and Reform Commission (NDRC) which announced August 29 that it will release government pork reserves beginning in September. How effective these measures will be to keep price increases in check and affect fourth quarter pig prices remains to be seen.
Producers are more concerned about water shortages and power rationing in Sichuan, Chongqing, and other regions such as Jiangsu and Shanghai. Many provinces and cities have been facing water shortages and power shortages for the past week. We’ve seen reports of 12.11 million pigs in Chongqing facing 45° C high temperatures and water shortages- not a good combination.
The extreme heat and lack of rainfall have led to drought conditions affecting crops in the field and supply of corn and other feed ingredients. Faced with water and feed shortages, many producers are accelerating marketing of their pigs despite the approaching peak season for demand and knowledge that profits will be higher after the price increases even further. The pace of slaughter in Sichuan is reported to be 10%-20% faster than normal.
Despite these current challenges producers are generally optimistic the near term as schools are opening and demand traditionally increases approaching the all-important Autumn Festival and Chinese New Year’s Holidays. At the same time we believe that the supply of pigs shall further decline month by month as result of liquidations that were only just picking up steam 10 months ago and lasting well into 2022. No doubt liquidation is still occurring at some level.
Market Outlook: The combination of increasing demand and tightening supplies is expected to keep prices up through the fourth quarter and the first half of 2023. We look for slaughter pig prices to reach 25 RMB/kg ($1.65/lb.) by the end of this year.