USDA updated Chinese pig farming data

At the end of the first half of July, the US Department of Agriculture (USDA) released its report on the global meat sector. For pig farming, the focus of the report is China, which could not be different, considering that it is the largest producer, consumer and importer of meat in the world, having the capacity to influence the dynamics of several markets. Even with the slowdown in sales compared to previous years, China is the main destination for Brazilian pork exports in 2023, and therefore it is worth paying attention to the data, especially because the Brazilian market has a large production.

The first point that drew attention is that USDA shows some optimism about consumption in the Chinese market, which should grow above the increase in production, which ends up resulting in a higher number of imports. Over the last few months, plenty of pork supply has been observed in the interior of China, so much so that piglet, live pig, and pork prices are depressed. It is also worth pointing out that the local government has a reserve of frozen meat and will be able to put it on the market as soon as prices are back above the balance point. The summary is that the pig chain remains in crisis due to oversupply.

Another point that deserves attention, as a counterpoint to the optimism of USDA regarding consumption, is the slowdown of the Chinese economy, a point that may affect demand until the end of the year. The Chinese government has been adopting expansionist measures, such as credit advances and interest rate cuts, but such tools take time to generate practical effects, considering that the level of default is high in the Asian country. For pork consumption in China, USDA pointed to 58.19 mln tons in 2023, an increase of 610 thousand tons compared to the April estimate.

For Chinese production in 2023, it was estimated at 56 mln tons, above the 55.5 mln tons indicated in April. The advance in production is natural, considering the local crisis, with less efficient farmers leaving the activity and with the advance of disposal of less productive matrices. China’s slaughter was projected at 710 mln head in 2023, an increase of 1.44% compared to the 699.95 mln head in 2022. It is the country’s biggest slaughter since 2015.

For pork imports by China, USDA indicated 2.3 mln tons, up 8.24% from 2.13 mln tons registered in 2022. As mentioned earlier, the number is impacted by the increase in domestic consumption. USDA will update the data in October and is expected to follow the local demand profile, which could result in downward adjustments. In addition to the high local supply, the Chinese currency (yuan) has devalued greatly over the last few weeks, reaching over 7.20 per dollar, a factor that makes imports more expensive. Negotiations for the near future of China in the world market tend to be tougher, especially in relation to pork ton prices, that is, pressure on the international market. Logically, countries with tighter supply and that export little are less affected. In the case of Brazil, where production is high and domestic availability is regulated by exports, the impact tends to be greater, affecting industry margins, which in turn put pressure on live pigs in the interior of the country.

The herd of matrices in the initial position stood at 43 mln head, unchanged. Next year’s number should drop, considering that less efficient matrices are being slaughtered. In any case, productivity has been high over the last few years, which should help pork production in 2024.

China’s total herd for the end of 2023 was estimated at 433.59 mln head, down 4.19% from the 452.56 indicated for the end of 2022, as a result of the advance in slaughter. With these data, it is possible to conclude that Chinese production will fall in 2024, which should favor the environment for local prices if the meat supply turns the year a little more balanced. The 2024 estimates are expected to be released by USDA in October.

Attached is the price evolution of the Chinese pork chain (with data from the Ministry of Agriculture and Rural Affairs of China) and the live pig futures contract listed in Dalian. Pig farming continues to experience a severe crisis, and market balance will occur when the herd reaches a level consistent with the current market situation and when the supply of pork dries up, which still seems a long way off.

Tags: pig farming, China, exports, USDA, pork, Brazil, Meat, Production, herd, markets, demand