Agriculture & Food

The steadily falling pig prices have depressed the morale of the pig industry.

Although there was an oversold rebound in "pork stocks" on the morning of June 22, it still could not change the previous trading day's main contract of live pig futures, 2109, which fell 6.79%, setting a new low for this species since its listing. The fact that stocks have fallen one after another.

As pork imports doubled year-on-year in 2020 and hit a record high, coupled with the double-digit increase in pork imports in the first five months of this year, China’s pig industry has made some remarks that the current decline in pig prices is due to imported pork. Caused by the impact of the domestic pork market.

However, the industry generally believes that the pig prices in the first half of the year have been declining and cannot be entirely attributed to "imports."

Zhu Zengyong, a researcher at the Beijing Institute of Animal Husbandry and Veterinary Medicine, Chinese Academy of Agricultural Sciences, told a reporter from China Business News that moderate imports can help stabilize pork supply in both domestic and foreign markets and curb excessive increases in pig prices. However, when the supply and demand are basically balanced or the supply is loose, pork Excessive imports will impact the domestic pig breeding industry.

It is worth noting that, as domestic pork prices are lower than those of foreign countries, imported pork no longer has a price advantage, and stocks are gradually accumulated. Entering June, importers have begun to reduce pork imports, but the imported pork segmentation standards are in line with food processing needs, and there will still be some fixed import requirements.

Change from "Fragrant Pastry" to "Hot Potatoes"

Since January this year, the prices of live pigs and pork across the country have shown a downward trend in general, and the recent decline has been sharp. According to the latest data from the Ministry of Agriculture and Rural Affairs, in the third week of June, the national live pig price was 15.13 yuan per kilogram, down 6.8% from last week and down 50.9% year-on-year.

Such a downward trend once again confirmed the long-popular saying in the industry that "a family has a wealth, not a hairy one".

The price of pigs fell below the cost line. For pig farmers and enterprises, the pigs in their hands suddenly changed from the original "sweet and sweet potato" to "hot potato".

On June 18, the China Animal Husbandry Association issued a "proposal letter", giving three reasons: on the one hand, since the fourth quarter of 2019, China's live pig production capacity has continued to recover rapidly, and the supply situation in the live pig market has improved significantly; on the other hand, seasonal demand Weakness, the aging of the population and the change of consumption habits, the consumption of pork has decreased. In addition to this, there is another important factor: "Last winter and spring, there were piglet diarrhea in certain areas, and some institutions irresponsibly spread false statements about the serious decline in production capacity. Some pig farm households listened to rumors and made blind decisions to carry out secondary fattening. , Disrupting the normal slaughter rhythm of live pigs."

According to the China Animal Husbandry Association, a large number of standard pig sources have flowed into the secondary fattening market in spring, and some novice breeders who have gone out to work have joined the secondary fattening army, and even some secondary fattening producers have competed with butcher companies for the source of large pigs. This led to a sell-off when pig prices continued to fall since April.

Many experts in the industry said that the fundamental reason for the plummet of pig prices in the first half of the year was the rapid recovery of domestic pig production capacity. The high profit in the market is the core driving force for the rapid recovery of pig production capacity. "In the past 10 years, the average price of live pigs was only around 7.5 yuan per catty, but last year the average price of live pigs reached 17 yuan per catty, and the pig industry has simply become a hugely profitable industry."

However, it is precisely in pursuit of huge profits that pig farmers and companies are overly optimistic about pig prices, breaking the rules and restricting the bar, thus greatly increasing the supply of pork. When the temperature gradually rises, "bovine pigs" (big pigs that exceed the standard slaughter weight) are no longer "cattle" and begin to be sold regardless of cost.

The aforementioned "proposal letter" painstakingly advocated that all pig breeding companies should "produce pigs in an orderly manner in accordance with the normal production plan. Don't panic when prices are falling, let alone listen to rumors, and arrange production with a gambling mentality." At the same time, continue to focus on epidemic prevention and control. Prominent position, speed up the transformation and upgrading, and take measures to save costs and increase efficiency. "The loss of pig farming in May was 9.7%. Some excellent farms can control the cost within 6 yuan per catty. This shows that they can make money even when the market is bad."

Pork imports have repeatedly hit record highs

In the past two years, pork imports have repeatedly hit record highs. According to customs data, in 2018, 1.193 million tons; in 2019, 2.108 million tons, an increase of 75% year-on-year; in 2020, 4.39 million tons, an increase of 108.3% year-on-year.

From January to May of 2021, the cumulative pork import volume has reached 1.96 million tons, an increase of 13.7% year-on-year.

The surge in pork imports has provided sufficient ammunition for the centralized export of frozen pork from the national reserve after the Spring Festival to suppress the price of pigs. As a result, some opinions have linked it to the current decline in pig prices.

Few people object to the role of imported frozen pork in alleviating tight market supply and stabilizing pork prices. Lin Guofa, the research director of Breck's agricultural product collection network, told China Business News that the role of imported frozen pork is more of an effective supplement to domestic pork supply.

He said that if the time axis is extended, the proportion of imported frozen pork in domestic pork supply has basically remained at 2%-5% in the past 15 years. When domestic pork supply is normal, imports account for 2%-2.5%; when domestic pig prices rise and pork supply is tight, imports increase, and the proportion increases to 4%-5%.

In 2018, there was an outbreak of African swine fever, domestic pig production capacity dropped sharply, and more imported pork was needed to supplement it. Therefore, from 2019 to 2020, a large number of imported frozen pork effectively increased the supply of pork, and to a certain extent, reduced the cost and difficulty of eating pork for Chinese consumers.

Wang Zhong, chief consultant of Mouyi Consulting, told China Business News that although frozen pork imports have increased this year, it is obviously not objective to blame the plummet of pig prices, and the relationship between the two is not strongly related.

According to statistics, in 2020, China's imported frozen pork will account for 10% of domestic pork supply, and if offal is included, it will reach 12.5%. This means that imported frozen pork has already played an important role in pork supply.

Taking the cumulative import volume of pork in the first five months of 2021 as an example, according to Zhu Zengyong’s analysis, 1.96 million tons of frozen pork imported, plus 800,000 tons of frozen pork restricted to be shipped from the warehouse from November to December 2020, totaled 2900 imports. Ten thousand live pigs.

Lin Guofa believes that after this year, the concentrated delivery of frozen meat has accelerated the current decline in pig prices.

At the same time, imports of other alternative meats are also increasing. According to statistics, in the first five months of 2021, imports of beef, lamb, and poultry increased by 18.6%, 22.4%, and 13% respectively.

Import driven by spreads

Due to the high production efficiency and low feed materials of foreign pig-raising countries, and the domestic and foreign markets treat pig by-products such as internal organs, trotters, pig heads and other parts differently, the Chinese consumer market has special preferences for them, while European and American consumption The market is not edible. Therefore, the import of pork and offal has always existed.

Zhu Zengyong said that due to factors such as rigid production costs, the cost of live pig production in China has been higher than that of European and American countries since 2007, and the gap has widened. This has led to long-term upside-down of domestic and foreign pork prices. The meat processing industry is more inclined to import cheap frozen pork. This depresses the purchase price of live pigs.

From 2001 to 2007, China's pork trade maintained a net export status. It was not until 2008 that imports began to exceed exports, and China became a net importer of pork. In 2016, China became the world's largest pork importer. So far, China’s pork imports have surpassed pork exports for 13 consecutive years. Imports have increased from 373,300 tons in 2008 to 4.39 million tons in 2020.

Lin Guofa said that from the perspective of the past 10 years, China's pork imports have shown a cyclical trend as a whole, but the peak value of each cycle of imports is increasing.

However, he believes that the impact of African swine fever on domestic pig production capacity in 2018 is incomparable in the past few cycles. Therefore, it is biased to judge the increase in domestic dependence on imported pork based solely on the surge in pork imports in the past two years.

Wang Zhong also believes that the pork produced in China in the past 10 years can basically meet demand, and even cyclical surpluses have appeared. The short-term import volume has reached a record high, which does not mean that pork import dependence has increased.

At present, domestic pig prices continue to fall. However, the supply of pork in Southeast Asia is tight, and there is no shortage of buyers in the international pork market. Pork prices are supported by solid market demand.

Zhu Zengyong said that since May this year, the CIF price of China's imported frozen pork plus tariffs and value-added tax has been higher than the price of domestic white strip meat, and domestic and foreign pork prices are no longer upside down. For slaughter companies, the supply of local live pigs is abundant, the price of fresh meat has dropped significantly, and the slow digestion of imported pork has led to a backlog of stocks. In the first half of this year, in European and American countries, especially the United States, pork prices continued to rise. Currently, there is no price advantage. It is estimated that imported pork will be on a downward trend starting in July.

In May 2021, China's pork imports have dropped by 2.2% year-on-year. In June, pork importers began to reduce frozen pork imports. However, Lin Guofa also mentioned that because the imported frozen pork segmentation standards meet the needs of food processing, there will still be some fixed import requirements.

It is worth noting that in recent years, China’s pork import sources have become more diversified. The EU accounts for two-thirds of China’s total pork imports. North America is China’s second largest source of pork imports, and South American countries’ pork market share is rapidly increasing.

In 2020, in the proportion of China's pork imports, Spain, Germany and Denmark in the European Union accounted for 21.9%, 10.7% and 8.4% respectively; the United States and Canada in North America accounted for 15.9% and 9.6% respectively; South America Accounted for 15.5%, of which Brazil accounted for 11%.

As China becomes the number one destination for Brazilian pork exports, the industry expects that Brazil will play a pivotal role in China's future pork imports due to its low feed prices and efficient breeding technology.