The aggressive capacity expansion of large-scale farms in 2020 has driven an estimated increase in slaughter pigs for China. In 2021, the number is expected to grow by 19.2%, reaching 613 million head. Total pork production is forecast at 49.27 million tonnes, an increase of 19.8% year-on-year.
In addition to the expansion of large-scale enterprises and the release of new production capacity, Dr Zhu said that one of the short-term factors affecting China’s pig production is the increase in production costs.
This is mainly due to the price rising of corn and soybean meal in past months. But as the harvested corn becomes available in the 4th quarter and imported corn and its substitutes increases, he expects the cost of corn will gradually decline.
The MARA also told a press conference in late April that it is taking measures to ensure the supply of feed grains by releasing the stock of overdue rice and wheat, and expanding the imports of corn and its substitutes. “Considering factors such as farmers’ and traders’ surplus grain, processing companies’ inventories and imports, the market’s supply of corn before the new season is sufficient. There is no foundation to support a sustained price increase,” the agriculture ministry stated. “The pattern of ensuring basic self-sufficiency in grain will not change in China.”
Dr Zhu added that through cost management – such as implementing precise nutrition, eliminating unperforming sows and enhancing the R&D of upstream breeding herd – pig enterprises are expected to reduce part of their production costs. But overall, it will be at about RMB 13-14 (US$ 2-2.16)/kg, still higher than the average cost of the previous cycles.
According to Dr Zhu, a mass of frozen pork has been accumulated in the Chinese market from October 2020 to February 2021. The release of these frozen products was also a factor affecting the excessive fall of pig price in March.
Meanwhile, China’s pork imports still reached about 1.17 million tonnes in the 1st quarter of 2021, a nearly 30% year-on-year growth. With the rise of global pork price since the beginning of 2021, he said China’s pork imports will begin to decline in the second half of the year, and full-year imports will stay high at about 3.8 million tonnes.
China’s pork imports peaked at 4.4 million tonnes in 2020, more than double from a year earlier, when average local live pig prices rose 60% to RMB 33.89 (US$ 5.24)/kg.
Furthermore, the impact of the Covid-19 on pork consumption has gradually slowed down in China, and pork consumption will rebound significantly in 2021, particularly with the decline in local pig prices. From this, Dr Zhu judged that in 2021, China’s pig price will have a good profit margin with the overall fluctuation around RMB 25 (US$ 3.86)/kg.
It is also expected that in 2022, the supply and demand of pigs will enter a basic balance, with the pig price fluctuating around RMB 18 (US$ 2.78)/kg. Then, after 2023, there will be a excess supply phase for 2 consecutive years and in the 2nd half of 2024, the market will enter a new price cycle.