China’s statistics department released figures on its pig farming that drew attention. The country produced 15.61 million tons in the first quarter of this year, an increase of 14% over the same period last year. Considering only the Jan-Mar period, it was the highest production in the last 3 years. Another important point is that demand in China remains affected by lockdowns, with the zero-COVID policy. Thus, high production with weakened domestic demand must result in low prices and weak performance of pork imports in the global market over the next few weeks.
On the other hand, there is already some optimism in China that the prices of its pork chain are at the bottom and can get support in 2022. What explains this optimism? Last year’s severe crisis discouraged local pig farmers, who opted to reduce housing and removed from the market those with less capital and financial efficiency, so driving to a cut in the herd estimate. China’s statistics bureau reported that the swine herd stood at 422.53 million head at the end of March, down 5.94% from 449.22 million head at the end of 2021. Matrices were put at 41.85 million head at the end of March, against 45.64 million head registered at the end of June 2021. In addition, the Chinese government has been acting regularly in the purchase of frozen pork for the state reserve to reduce the local supply and create a favorable environment for prices. This year alone, 5 purchases have already been made, totaling almost 200 thousand tons.
The herd data and purchases created positive expectations that were passed on for the behavior of live pig futures on the Dalian exchange. The July contract closed last Friday (29) at 16,690 yuan a ton, up 15.78% from the closing on April 15, when it was quoted at 14,415 yuan a ton.
In the physical market, prices have also recovered. China’s Ministry of Agriculture and Rural Affairs reported that the average price per live kilogram in the country stood at 13.53 yuan in the third week of April, up 5.7% from the previous week. However, prices are still quite depressed in China, and that was only a shy reaction.