Genesus Global Market Report – China
Lorne Tannas – General Manager in China, Genesus Inc.
China Pork prices were 14.36 CNY ($2.15 USD) per Kilogram as of August 23rd 2017. Although this seems like a real decrease from the 20 CNY ($3.00 USD) from a year ago this is more the average price over the last 5 years. Pork prices have been anything but stable over the last 10 years where as consumption has continued on an ever increase in the Chinese market. China represents 1/5 of the worlds population but represents 50% of the pork consumption.
Chart A Chart B
Over the last 6 to 12 months the Sow herd has continued to decline. This is due to the new measures put forth by the Government on environment regulations. The farms without manure management plans, built in proximity to water sources and located too close to populations have had to close or relocate. In one county we visited, the sow herds were reduced from 100,000 sows to 10,000 in under one-month period. Penalties include loss of land. This is an extreme measure with a country steeped in ancestral history.
Small size farms are particular under pressure. What North American farms have experienced over 50 years we see Chinese farm size reduction is happening in 15 years (Chart C).
Small farms are dropping faster than Mid sized and Large farms can be built. The Chinese government has new standards that are compounding this situation. Where consumption just continues to grow (Chart B). Short term this means the pork has to come from imports (Chart D). Long term, China will continue to import but they will grow their mid size and large farms. The carcass weights will have to increase and performance will continue to improve. The traditional Chinese Pig cannot supply the need or the growth of consumption demand.
The demand for good genetics is paramount to the lowered herd size China is experiencing. It is a big question if China can ever produce enough pork for the increasing demand. Their present model won’t work and will have to change. The government is under pressure to keep pork prices low to prevent inflation like they experienced in 2008 and 2011 when pork prices surged. The balance is to have enough imports to meet demand. Low enough imports for price incentive to have herd growth.
The cost of production has also continued to rise. Most small farms raised pigs with on farm food stuffs and were very self sufficient. Large farms rely on off farm grains and imported grains. Another issue is manpower. After 30 years of one child policy the aging population needs to be replaced or China must modernize the farms and reduce labor.
The price this week will have a lot of influences. Predicting price is a fool’s game. Over time it will continue to rise with demand. There is no greater demand for pork than China.
This post was written by Genesus