The Van Trump Report

What We Know About China’s Hog Herd

China’s hog herd size is once again being questioned as prices of the country’s most popular meat have doubled from last year’s levels even as official statistics show inventory levels and production remain virtually unchanged. China officials blame the higher prices on farmers holding pigs back from slaughter. However, industry insiders say China’s herd inventory and pork output has shrunk more than official statistics indicate due to farmer losses last year.

China’s National Bureau of Statistics data shows hog slaughter in Q3 was mostly unchanged from the same timeframe last year, while third quarter 2022 pork output was 12.1 million metric tons (MMT), slightly higher than 2021 production of 12 MMT. In the first nine months of 2022, NBS data actually shows pork output was up nearly +6%.

With NBS data showing supply has, if anything, slightly increased, it has raised questions as to why China pork prices in October were up almost +52%. Average hog prices are up even more, having skyrocketed some +150% from a year ago, according to NBS data.

According to a recent Reuters article, China’s state planner blames surging prices on farmers holding back pigs from slaughter as they wait for higher prices, while others seek to profit by boosting weights. Analysts say the data somewhat supports that reasoning. China’s total hog inventory was reported at 444 million at the end of September versus 438 million at the same time in 2021. For reference, here at home, the USDA reported in late-September that the US had about 73.8 million hogs and pigs, 67.6 million were market hogs, while 6.15 million were kept for breeding. In other words, China has about six-times the number of hogs that we have here in the US. 

Industry analysts are pointing to the big losses that China hog producers endured last year. A combination of a pork oversupply, plunging demand, and high feed costs from June 2021 until July of this year saw farmers losing as much as $100 per hog, according to Reuters. Financial data analyzed by DimSums shows 14 of 21 publicly listed China hog companies reported losses in 2021, and 20 reported losses in the first quarter of 2022.

Over the summer, meetings held between state planners and big China hog and pork companies revealed a low supply of already fattened hogs due to a reduction of capacity that was blamed on the fallout that started in 2021. Feed production also contradicts China’s official statistics. Pig feed output fell -8% in the first eight months of 2022 compared with a year ago, according to the China Feed Industry Association.

Jim Long, chief executive at Canada’s Genesus Inc, a supplier of breeding pigs to China, told Reuters that he believes China’s sow liquidation is greater than reported, estimating the decline to be as much as -8 million head. Several other industry insiders have also raised similar concerns. China reported the sow herd at 43 million at the end of September versus 44.6 million in September 2021, down just -1.6 million.

It’s worth noting that the latest update from USDA’s Foreign Agricultural Services post in Beijing projects China’s pork imports will fall for a second year in a row in 2023. However, the questionable accuracy of China’s hog numbers has many analysts forecasting a bump in China’s imports through the rest of Q4 2022 and at least the first part of 2023. Rabobank in its Global Pork Quarterly Q4 2022 report forecast that overall lower global pork inventories and tight supplies would support trade in the final quarter of 2022 and into early 2023. (Sources: Reuters, Feed Navigator, Meat+Poultry, DimSums)

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