China’s Pork Prices Fall in 2023 Amid Heightened Production and Subdued Demand

China has consistently maintained its position as the leading global pork-producing country, commanding about 45% market share in 2022 at 55.41 million metric tons (mmt). Despite recent shipment volume reductions, China has remained the top pork-importing country, with imports reaching 1.74 mmt in 2022. These statistics underscore China's status as the largest global pork consumer, with pork accounting for approximately 60% of the country's total meat consumption. However, the Chinese pork industry is grappling with declining prices attributed to an oversupply of pigs for slaughter and subdued demand amid economic challenges.

China’s Pork Production Trending Upwards Due to Oversupply of Pigs for Slaughter

The China National Bureau of Statistics has reported that pork production reached 43.01 mmt in the first nine months of 2023, a 3.6% increase compared to the same period in 2022. In Q3-2023, Chinese pork output surged to 12.69 mmt, a 4.8% growth over Q3-2022 and the highest volume for this quarter in at least a decade. The notable rise in pork production is primarily attributed to the oversupply of pigs for slaughter in 2023. Furthermore, market experts highlight an improvement in the production efficiency of sows, as each sow is reproducing 0.5 more pigs every year than the previous year. A well-fed sow can produce at least 10 piglets (litter) from each pregnancy and may have two litters each year.

The Ministry of Agriculture reports that China's pig slaughter reached 271.1 million heads in the first 10 months of 2023, a substantial 17% increase compared to the same period in 2022. In Oct-23, pig slaughter reached 28.67 million heads, a 3.3% growth compared to Sep-23 and a remarkable 36.7% rise over Oct-22. The pig slaughter uptick is associated with challenging economic conditions, which has led to a high asset-to-liability ratio in many swine breeding companies. Faced with this dire situation, several pig firms opted to sell off their swine to bolster cash flows. Simultaneously, smaller producers are hastening swine sales as they exit the market due to an unfavorable economic environment.

With the surge in pig slaughter, the United States Department of Agriculture (USDA) anticipates China’s pork production to reach 56.5 mmt in 2023. This represents a 1.97% increase compared to the 2022 figure and the highest volume since 2014. However, a pessimistic outlook is projected for 2024, with China's pork production expected to decline by 1% year-on-year (YoY) to 55.95 mmt. This forecast is attributed to the anticipation of low slaughter volume in 2024, influenced by reduced productive pig herds and the continued impact of African swine fever (ASF).

China’s pork imports amounted to 1.9 mmt in the first eight months of 2023, an 8.68% increase from the same period in 2022 but a substantial 91.58% drop compared to the corresponding months in 2021. Spain, Brazil, Canada, the United States (US), and the United Kingdom (UK) were the primary sources of these pork imports. The import decline in 2021 and 2022 can be attributed to China's recovery in pork production to pre-ASF levels in 2022. The ASF outbreak in 2018 had a severe impact, leading to a significant reduction in the pig population. The number of pigs in China plummeted to around 310 million heads in 2019, a 27.5% decline compared to 2018. China resorted to significant pork imports to offset this shortage, reaching a record 4.3 mmt in 2020. Currently, the overall situation of ASF in China is stable.

The USDA anticipates an increase in China's pork imports, forecasting a total of 2.3 mmt for 2023, a substantial 32.18% rise compared to 2022. Import volumes for the first five months of 2023 alone surged by over 20% compared to the same period in the previous year. However, the pork import trend in H2-2023 may decelerate due to weakened domestic pork prices, subdued economic activity, and reportedly elevated stocks of imported pork. A modest 0.86% increase is projected for 2024, primarily influenced by the expected reduction in domestic production during that year.

China’s Domestic Pork Prices Trending Downwards Due to Pork Oversupply and Subdued Demand

Pork prices in China have experienced volatility throughout much of 2023. According to Tridge, the average wholesale price of frozen pork ham and shoulder (dressed) in Hefei, China, averaged USD 2.16 per kilogram (kg) in W50, a 4.85% week-on-week (WoW) decline and a substantial 32.62% YoY decrease. Remarkably, China's wholesale pork prices have consistently remained below the levels observed in 2022 since early Apr-23 and have dropped by 14.29% since Jan-23. This sustained price decrease is attributed to an oversupply of pork in the market coupled with subdued demand.

Over the years, China's pork demand witnessed steady growth, driven by the expanding middle-class population. However, the anticipated consumption resurgence following the lifting of COVID-19 restrictions in early 2023 did not materialize. Instead, a slowing economy resulted in sluggish pork demand, even during the Autumn national holidays. The National Bureau of Statistics has reported a 0.5% YoY decline in China's consumer price index in Nov-23, marking a weaker-than-expected level and the most significant plunge since Nov-20. Experts attribute this consumer price index decline to the ongoing reduction in pork prices.

Furthermore, unseasonably warm weather in Nov-23 has delayed the traditional surge in cured pork demand in the winter months and the upcoming festive new year. Curing meat typically starts when temperatures fall below 10°C. Additionally, Chinese consumers are shifting away from pork meat, even as prices decrease, opting for healthier alternatives such as chicken.

Some analysts suggest that the ongoing decrease in pork prices might intensify deflationary pressures in mainland China. In response, China has announced plans for a third pork purchase in 2023 to increase national reserves, aimed at boosting sluggish prices. The Chinese government employs a strategic approach to stabilize pork prices by managing pork reserves. When prices are elevated, the government releases reserves into the market, and conversely, when prices are low, it procures from producers to maintain stability in the market. The previous stockpile resulted in a temporary rebound in pork prices in Jul-23 as quotations started declining again by early Aug-23. This situation underscores the ongoing struggle impacting millions of pig farmers in China, from smallholders to large enterprises grappling with profitability challenges.

China continues to be a significant influencer in the global pork market, holding leadership positions in production, imports, and consumption. However, industry experts are pessimistic about pork prices in H1-2024. This forecast is underpinned by an abundance of pork supply and the expected peak period for pig slaughter, contributing to a sustained high level of pork availability. Moreover, pork consumption is projected to stay subdued in H1-2024, with the hospitality and retail sectors expected to maintain similarly low demand levels. Nonetheless, a potential turnaround is anticipated in H2-2024, with an expected rebound in pork prices attributed to the reduction in the projected productive pig herd during this period.