Pork is historically the most popular animal protein in China, accounting for 60% of all domestic meat consumption, claims the Agriculture and Horticulture Development Board (AHDB), and is often used as a key indicator for inflation. The Chinese hog market faced unprecedented challenges in 2023, marked by a destocking trend among pig producers, financial strain, African Swine Fever (ASF) outbreaks, and evolving consumer preferences.
The Chinese domestic market is proving to be challenging for pig producers. The heightened apprehensions surrounding animal disease outbreaks have encouraged the slaughter of pigs before attaining optimal market weights, squeezing smaller players out of the industry.
Darin Friedrichs, Director of Market Research for Sitonia Consulting, an independent information service company providing analysis and insights into China’s agricultural commodity markets, shed some insight on the current struggles in the Chinese hog market in an interview with Feedinfo touching on ASF and the recent destocking observed among Chinese pig producers, as well as factors driving Chinese pork market trends and their implications for supply, demand, and pricing.
Financial strain
In recent months, major corporations have been securing capital through loans, stock sales, and divesting subsidiaries, signalling they were experiencing significant financial challenges.
Friedrichs observed, “The industry lost money for nearly all of 2023. This has put strain on [the] financial situation of hog companies and the economics are forcing the destocking trend. In 2022, companies lost money in the first half of the year, but were able to make good profits in the second half of the year, but this year has been nearly all losses.”
To combat this, “Some companies are looking to hedge more in the futures market. Adoption of hog futures by large companies has been relatively slow, which has meant they are more exposed to price fluctuations. Companies are also selling off unrelated businesses to focus more on their hog operations, or doing pilot programs where affiliated farmers take on more of the price risk but also potential upsides. Lastly, some of the weaker companies are looking to merge,” he said.
On the other hand, “The government has been relatively hands-off when it comes to the hog market in 2023,” Friedrichs added. “There has been some buying of pork into government reserves, but this hasn’t changed the overall supply and demand situation.”
Overall, he reckoned, 2024 should see hog prices recover as producers are forced to cut capacity.
Trade and disease impacts
Whilst ASF has been seen in the south, northern China has experienced more severe outbreaks. According to Friedrichs, the outbreaks decreased market prices, as smaller and medium-sized farms with less robust biosecurity measures hurried out of the market.
Friedrichs said, “Long term, these outbreaks of African Swine Fever will continue to accelerate the consolidation in the hog industry. Large farms have better biosecurity and they are able to distribute their risks across multiple farms and regions.”
In the immediate aftermath of ASF’s arrival in China five years ago, imported pork surged into the country, only to decline again once China’s own production rebounded. As Friedrichs notes, “There have been more trade agreements in recent years which allow other countries to export pork and beef to China. The pork volumes are relatively small because domestic prices are depressed. Beef imports have been relatively stronger due to changing dietary trends and more approvals of overseas beef plants to ship to China. This has added some competition for the pork producers.”
Evolutions in supply and demand
“Younger consumers are more health-focused and are eating more diverse proteins, including more poultry, aquaculture products, and beef. Many industry reports this year have complained about weaker-than-expected demand for pork, especially around major holidays which should typically see stronger demand.
"In 2019 and 2020 there was a large push for plant-based meat alternatives by some companies, but this has mostly faded,” he noted.
Overall, many observers agree with Friedrichs’ assessment that the country’s pig slaughter is likely to fall; for example, the AHDB forecasts that China’s pork production in 2024 will “decline by 1% to 55.95 Mt year on year… due to a reduced pig inventory and the continued influence of disease...’’
