USDA updated estimates on China’s pig farming

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Porto Alegre, January 26, 2022 – Last week, the United States Department of Agriculture (USDA) released its global meat report, and the focus is on Chinese pig farming. As is well known, China is the largest producer, consumer and importer of pork in the world market, and its movements can affect the dynamics of several markets, including Brazil. USDA brought major changes to China’s 2021 and 2022 data in comparison with the October 2021 report, which drew attention because of the short window between the reports. The Department increased production, consumption, the herd of matrices, and the total herd. USDA seems less concerned now about African swine fever (ASF) and its impacts on the Asian country.

China’s National Bureau of Statistics also released Chinese swine figures for the close of 2021, which came stronger compared to those from USDA, as will be seen ahead.

USDA put Chinese pork production at 48.85 million tons in 2021, which represents a 34.42% increase over 36.34 million tons in 2020. For 2022, the estimate is 49.5 million tons, 1.33% higher. The previous estimate for 2022 production was 43.75 million.

On the other hand, the Chinese government has already pointed to the production of 52.96 million tons in 2021, just below the 53.4 million tons produced in 2017, a period before the emergence of the first cases of ASF in the country. Thus, the trend is for the USDA to adjust its numbers again in April.

It is worth noting that the Chinese government adopted several measures to support farmers after the waves of ASF that decimated the local herd, starting at the end of 2018. Besides subsidies and credit, the escalation of prices of live pigs and pork in 2019 and 2020 favored the advance of investment by large industries, changing a little the face of the sector in China, becoming more professional, with productivity gains.

For slaughter, the USDA forecast for 2022 was 620 million head, up 0.81% from 615 million in 2021. In its previous report, USDA had estimated 550 million head for 2022. China’s Bureau of Statistics put 2021 slaughter at 671.28 million head.

For domestic pork consumption, USDA forecasts 53.15 million tons this year, an increase of 0.85% compared to 53.15 million tons in 2021. The Oct/2021 estimate put consumption at 48.41 million tons for 2022. Low pork prices must favor consumption in the country throughout the year, however, it is worth noting that even with the proximity of the Lunar New Year, local demand is still not heated, according to news from abroad, which together with the increase in supply result in a decline in prices along the Chinese pig chain at the beginning of the year.

For Chinese imports in 2022, USDA estimated 4.2 million tons, down 4.55% from last year. The number is still optimistic considering the current price situation in China and that the Asian country recently increased the tax on imported pork from 8% to 12%, trying to discourage purchases. Over the past few months, China has reduced its purchases from Brazil, the United States, the European Union, and Canada. The Chinese government is adopting measures that help to reduce the local supply, but so far local prices cannot find room for recovery, which denotes good local supply and continuity of timid imports over the next few months. Thus, Brazil tends not to repeat the export numbers seen last year, which means there will be a greater supply of pork in the Brazilian domestic market, which is bad for prices. It does not mean that China will not buy Brazilian pork, but the exported volumes will be smaller and at low prices. The Brazilian market needs to adjust production and seek to diversify its export flow so that the domestic market can find a balanced environment for domestic availability and that favors price recovery in the medium and long term. As for diversification, Asian countries that suffer from ASF are a good alternative, such as Vietnam and the Philippines, but clearly without the same potential as China. Russia can increase purchases throughout the semester, considering the recent reopening of Brazilian plants and that the country has also registered ASF cases.

China’s Ministry of Agriculture and Rural Affairs (MARA) reported last Tuesday that the average pork price in the country stood at 26.93 yuan per kilogram in the second week of January, down 3.37% from the close of 2021 and at a level similar to that registered in the first half of 2019. The price of live pigs dropped even more strongly in the same period, closing on average at 15.66 yuan per kilogram in the second week of January, against 16 .92 yuan registered at the end of 2021, down 7.45%.

Another point that drew attention in the USDA report is the herd of matrices in China. For the beginning of 2021, it was estimated at 38.5 million head by USDA, a jump of 24.2% over the 31 million head of the beginning of 2020. For the beginning of 2022, the Department pointed to 39 million head, an advance of 1.3%. Despite the decrease by 4 million head from 2018, the herd of matrices in China is more productive, and this should support the availability of pigs in the market over the next few months.

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