Great volatility in Chinese hog and pork prices is rippling through the global market. China’s slaughter rates were unexpectedly high in Q2, pushing pork production up 35.9% YOY in 1H, according to official data. The sudden supply increase resulted in a sharp price decline and negative results in both farming and trading in 1H, pointing to low pork imports into China in Q3. While we expect hog and pork prices to rebound in Q3, the estimated high frozen pork inventory will impose a lot of downward pressure on prices. We expect the slowdown of imports in the coming months will reduce full year imports from 2020’s record levels by 10% to 20%. This will lead to a redistribution of pork trade in the global market and could place downward pressure on pork prices in exporting regions.
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China: China’s pork production showed strong growth in 1H, due to liquidation and oversized hogs. ASF continues to spread, causing ongoing liquidation in specific regions. Demand growth lags behind supply growth, reflected by the sharp fall in prices. Restocking has slowed, as farmers suffered sizable losses. Due to the liquidation of sows in 1H, we expect slaughter in Q3 to slow and prices to rise. However, the high frozen pork inventory will limit price movements.