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China hog, pork production to decline in 2022

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Lower prices, disease outbreaks lead to significant slaughter and delayed restocking in 2021.

China’s domestic hog production in 2022 is expected to decline by 5%, according to a newly released USDA Foreign Agricultural Service Global Agriculture Information Network (GAIN) report. The decline, the report suggested, is the result of lower prices and disease outbreaks in 2021 which led to significant slaughter and delayed restocking.

Consequently, the report forecasted that domestic pork production in 2022 will also decline, by 14%, as fewer hogs come to market. Furthermore, government policies designed to limit price fluctuations will undermine expansion of small- and mid-sized operations. Large, well-capitalized operations, on the hand, will benefit from other subsidy policies, USDA attaché Alexandra Baych noted.

According the report, the extent to which production will respond to demand in 2022 will depend on the extent to which China’s policy planning and regulatory agencies, the National Development and Reform Commissions (NDRC) and the Ministry of Agriculture and Rural Affairs (MARA), allow pork prices to climb as pork supplies tighten. Baych noted that the NDRC’s managed pork price system is designed to limit price fluctuations.

“Small-scale operations that would normally enter the market when profits are high will be disincentivized,” she explained.

In 2021, the NDRC published a hog price to feed price ratio between 6:1 and 5:1 calculated as the “break-even” price for hog and pork producers. According to the GAIN report, when the 6:1 ratio was reached, the NDRC published alerts to warn the market that the price was reaching breakeven. When the 5:1 ratio was reached, the NDRC announced the intent to purchase frozen pork from the market for China’s state reserves. If these measures are unsuccessful, Baych said the NDRC has indicated it would instruct provincial and local governments to address any further price declines through unspecified actions. Sources have shared with USDA that a price ceiling for pork will be managed in a similar fashion.

The NDRC announced in July an intent to purchase up to 42,500 MT of frozen pork. Since NDRC first auctioned purchases of frozen pork, the decline in prices has been less extreme, but the decline in prices has not yet been reversed, the GAIN report noted.

In a press conference on July 21, 2021, MARA confirmed the government would take measures against sharp price increases. Baych said MARA warned farmers that price speculation and the period of “high hog profit farming” is over - signaling continued government intervention in the market.

Imports, opportunities to rise in 2022

Pork imports will rise to 5.1 million metric tons as consumer demand for pork exceeds domestic production, the GAIN report shared. While China’s domestic pork price controls may reduce the price advantage of imported products, Baych said consumer demand will drive purchases of imported pork products.

Consumers will also continue to expand their use of e-commerce platforms for at home purchases, and imported meat products will utilize these channels to expand sales.

“In 2022, the volume of imported pork products sold through e-commerce platforms will increase as this new distribution channel supports growth and product differentiation for imports,” noted Baych. “Popular imported cuts include pork neck, bone-in-ham, and leg/ham hocks, among others.”

Demand for “fresh” or “warm” meat is also expected to grow as e-commerce expands. Baych relayed that an e-commerce platform in 2021 raised $700 million in funding to sell chilled prepacked “daily fresh pork” products slaughtered on a specific day.

In addition to growth in the “fresh” or “warm” category, Baych said the use of imported frozen pork in foodservice and food processing sectors will also increase due to limited domestic pork supplies.

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