China: it is the pork powerhouse of the world with over 51 per cent of the world’s population of pigs raised within China, writes Ron Lane, Business Director Asia Pacific.
Looking at the size of the breakdown of the inventory for July, 2015, the adjusted information from MOA is indicating 385.57 million on-farm pigs and a 38.78 million sow herd (as compared to June at 384.80 million on-farm pigs and a 39.02 million sow herd).
The July 2015, 385.57 million on-farm inventory is up 0.02 per cent from last month (June, 2015). This is the first increase in several months. However, the total drop in on-farm pigs as compared to July, 2014 is 10.3 per cent .
Looking at the July 2015 sow herd, it was down 0.6 per cent from June and was down 14.5 per cent from one year ago.
In July, a further 234,000 sows disappeared. During the first 7 months of 2015, a total of 4.22 million sows have been culled and/or eliminated from the total national herd. Since February 2013 (the past 30 months), the China sow herd has seen more than 12.16 million sows eliminated-almost equal to all of the sows from the USA (ranked # 2 in sow numbers); Vietnam ( ranked # 3 in sow numbers) and Brazil ( ranked # 4 in sow numbers) combined, were to slaughter all of their sows!
The current sow inventory is the lowest level in more than 4 years.
Market pig prices in China had fallen continuously from early August, 2014, but have risen during the past few months (since the low weekly price for this year on March 16th of 12.09 RMB/kg ($ 1.90 USD/kg-$ 0.86 USD/lb).
Recently (September 8th), the market pig price reached 18.07 RMB/kg-$ 2.84 USD/kg-$ 1.29 USD/lb). Currently, the market pig price is giving producers about 600 ($ 94.19USD/pig) to 750 RMB ($ 117.74USD/per pig) profit margin depending on the scale of the operation.
There is a substantial increase in the pig to grain ratio. As of last week, the ratio had reached 8.03: 1, mainly due to the decrease in corn prices ( 6:00:1 is considered the benchmark for breakeven prices). Chinese producers are getting an increasing market pig price along with some favourable feed costs.
China Live Pig Prices (RMB/kg-live weight)
Pork prices have been following a similar rising trend: June 2nd at 19.57 RMB/kg ($ 3.07 USD/kg-$ 1.39 USD/lb.); June 30th at 21.21 RMB/kg ($ 3.33 USD/kg-$ 1.51 USD/lb.); July 28th, the pork price was at 23.79 RMB/kg ($ 3.73 USD/kg-$ 1.69 USD/lb.) and September 1st, the pork price was 24.17 RMB/kg ( $ 3.79USD/kg-$ 1.72USD/lb.). Pork prices have been rising for 5 consecutive months and have gone up more than 30 per cent as compared to early March.
Average corn prices have been fairly stable for the past few weeks with corn at 2,307 RMB per tonne ($ 362.17 USD/tonne) for September 1st and at 2,341 RMB per tonne ($ 367.50 USD/tonne) on August 4th, 2015. The national soybean meal price was 3,015 RMB/tonne ($ 473.31 USD/tonne) for September 1st, 2015 and at 3,081 RMB/tonne ($ 483.67 USD/tonne) for August 4th, 2015.
On August 23rd, the “one port, two inspections areas” imported meat inland port was officially started after passing all inspections. These ports are located in Zhengzhou and Luohe in Henan province. The first phase located at Zhengzhou can check 1,200 tonnes of imported meat per day or about 0.4 million tonnes per year. When the Luohe inspection area is completed, it will also be able to inspect 0.4 million tonnes of imported meat per year. These sites are the first inland meat import ports in China.
The Consumer Price Index (CPI) is now quite interesting for the national government. The CPI is made up of about 31.8 per cent food found in the consumers’ basket. Pork is estimated to be about 1/3 of the food portion of the basket or in other words, about 10 per cent of CPI as a whole. CPI was 1.6 per cent for July and is forecasted to be 1.9 per cent for August (just released at 2.0 per cent --higher than projected) as compared to 1.4 per cent for June, 2015.
The National Government “sensitive” food prices (including pork) weakened significantly after Spring Festival with a 4.5 per cent decline. However, since that time, the pork prices are rising by 16.7 per cent in July, by 7.0 per cent in June and by a 5.3 per cent increase in May).
A rise in pork and vegetables (10.5 per cent for vegetables in July) are the two major factors that have taken the nations’ CPI to a nine month high. Recently, China Daily reported on a discussion with a housewife in a district near Beijing. On this morning, she spent 45 RMB ($ 7.06USD/kg-$ 3.21USD/lb.) for a one kilogram pork fillet. Zhang Ming, a 60 year old retired woman said “It’s amazing considering that it wouldn’t have cost 35 RMB ($ 5.49USD/kg-$ 2.49USD/lb.) just a couple of months ago” A sustained increase will cause the national government concern. As a measure, when pig prices increase, CPI should increase. Look to the government to curtail the rapid rise in market pig prices during the next few months--most likely through imports!