Market Report – China (Jan 2018)
By Lorne Tannas, General Manager China
As we welcome 2018, the year of the dog, the Chinese pork producer should be fairly optimistic.
I have been traveling around China talking to producers and some say the price is going up, and some say the price is going down. To me, this is an indication that the price will remain stable. Guessing price is a fool’s game, but heck, I am going to try.
Let’s look at some important demography’s that may help make a prediction. There are several important indicators that say things should be good over the next 10 to 15 years. Lots of Chinese farmers helped me to draw this conclusion:
- First the aging population will live out another 10 to 15 years adding another 100 million people to eat meat and the first choice of meat in China is pork. It won’t be until 2060 that there is a significant decline in population. (Table 1)
- Second, affluent and middle income will be the complete reversal levels of 2013’s lower middle income and low income. (Table 2). This means more money to buy pork the choice of meat. They will also want higher quality pork. Look for Chinese pushing for Japanese standards of meat quality.
- Third the meat import trend is for more imports over time (Table 3)
- China has limited resources to raise pigs.
- Land to grow corps, corn and soy specific for feed.
- Land to build farms on, suitable and sustainable for the environment.
- Young people to work on the farms
- These resources are needed to add value to farming. Instead we will continue to see China buy value added pork where the value is done in countries with the needed resources to do this. China just doesn’t have these things to raise the pork internally.
The Chinese pork industry is policy driven. This will prolong the good prices.
- The government sets the meat import amount, to control price. This is done to control inflation and control supply. They never want to run out, but still cannot afford to see price get uncontrollably high. This is a very difficult juggling act to do. The price becomes lower which inhibits expansion. This will prolong pork industry growth.
- The second policy is the new building regulations and environment conditions. Although this is a very good and important decision, it restricts land use and area again slowing expansion and growth.
- The third, focus area expansion in certain provinces. Several key areas in China have been chosen for expansion. This is good for large companies, but more difficult for small to mid size companies for hog expansion. Small and midsize companies still represent the largest number of hog growers in China.
- Also, the one child policy has had an impact. Although it has recently been changed. The number of available workers under 30 years of age is limited in China. Most young people do not want to work in rural and isolated areas of China. This has made it very difficult to draw on good employees. It has also driven up price for labor on farms.
What all this points to, is 10 to 15 years of very good pork price in China. Some what controlled by the government; some by increased incomes and disposable cash; some by the aging population and population growth. It should be noted these influences will only prolong the good prices. Growth will be slow but positive, in production performance, meat quality and safety.
I had this conversation in many provinces here in China, and this is what farmers are saying as well.
2018, the year of the dog, will be a good year for pork producers in China.
This post was written by Genesus