“This year’s reversal seems like a classic case of ‘the cure for high prices is high prices’: Production and imports in the past year have both increased to capture outsize profits. China’s pig herd grew 23.5% year on year in May, according to the government. Imports in 2020 doubled from a year earlier. The outbreak earlier this year also caused some farmers to cull their herds earlier, bringing forward pork supply.”
The Journal article added that,
All this may have some ripple effect on global prices. Imports will likely slow as importers are unlikely to make money in the current market. Pan Chenjun, a senior analyst at Rabobank, expects China’s pork imports to drop 10% to 30% from 2020 levels. China made up about half of global pork imports in 2020.
Earlier this week, Reuters writer Dominique Patton reported that, “China’s state planner said on Monday that central and local governments will start buying pork for state reserves to support prices, even after prices rebounded sharply from a two-year low last week.
“The move comes after live hog prices in the world’s top pork producer plunged 65% from January to early June as outbreaks of disease triggered panic selling, and as a glut of large pigs were sent to slaughter.
“Falling prices eroded profits for farmers and raised concerns that many would stop farming, triggering shortages later on.”
“Through last week, the most-active hog futures contract trading on the Chicago Mercantile Exchange has fallen nearly 17%, bringing the price down to 99 cents a pound—the first time it has fallen under a dollar since March. Futures have posted a slight rebound to start this week, rising 0.8% Tuesday to nearly $1.04 a pound.”
With respect to feed grain demand, the Journal article pointed out that,
Some analysts expect demand for U.S. grains such as corn and soybeans to weaken as hog producers use less feed.
“‘The news that pork prices are plunging in China foretells a fall in [grains] demand,’ said Scott Irwin, head of agricultural marketing department at the University of Illinois.”
Keith Good is the Farm Policy News editor for the farmdoc project. He has previously worked for the USDA’s National Agricultural Statistics Service, and compiled the daily FarmPolicy.com News Summary from 2003-2015. He is a graduate of Purdue University (M.S.- Agricultural Economics), and Southern Illinois University School of Law.
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