Weekly Product Updates

W51 Pork Update: Pork Industry Challenges in Vietnam and China Raise Concerns

Frozen Pork Ham & Shoulder
Published Dec 27, 2023

Factors Contributing to Declining Pig Prices in Vietnam

In Nov-23, the average price of live pigs in Vietnam remained stable at USD 2.10 per kilogram (kg) month-on-month (MoM). However, in the first week of Dec-23, prices hit their lowest point in 2023 at USD 1.97/kg. This reflects a significant drop from the peak in July-23 when prices reached USD 2.51/kg. Despite a slight increase in the past two weeks, bringing the average Dec-23 price to USD 2.01/kg, it is still USD 0.12/kg lower than the same period in 2022. Production costs range from USD 1.85 to USD 2.14/kg, leaving farmers with minimal profits or losses. The year-on-year (YoY) data indicates consistent pricing trends, with 2023 consistently lower than 2022, except for June.

Currently, Vietnamese pig prices align with Thai pig prices but are lower than Chinese by USD 0.04 to 0.12/kg, and higher than Cambodian by USD 0.12/kg. Pig breed prices, influenced by factors like scale and region, range from USD 51.37 to 65.75 per head. The drop in live pig prices can be traced back to factors such as diminished purchasing power, decreased food consumption in industrial parks, a rise in domestic pork supply, negative sentiments stemming from African swine fever, ongoing imports, smuggling activities, and the absence of an equitable profit-sharing mechanism within the pork value chain. Despite lower farm gate prices, retail meat prices remained unchanged, benefiting traders and retailers but posing challenges for farms and consumers.

Unprecedented Challenges and Financial Downturn Gripping Chinese Pig-Raising Companies in 2023

Chinese pig-raising companies are grappling with unprecedented challenges, experiencing cumulative losses and extended periods of financial downturn throughout the year. Key industry players collectively suffered net losses exceeding USD 1.4 billion in the Q1 to Q3 of 2023. The pig sector's average asset-liability ratio soared to a historic high of 62.28%, indicating increasingly tight funds.

The economic downturn, sluggish demand recovery, oversupply of production capacity, and supply-demand imbalances are cited as primary factors contributing to the industry's financial woes. Mainland pork prices have consistently declined, hitting a low of US 1.92/kg in W49. Factors such as abundant production capacity and oversupply have led to a negative correlation between pork prices and production capacity. The relationship between pork prices and production capacity is critical, as market confidence wavers due to insufficient consumer acceptance. The increase in pig slaughter volume, coupled with enhanced breeding efficiency, has led to a surplus in supply, exacerbating the squeeze between supply and demand and causing sluggish performance in pig prices.

The market's lack of optimism for the future is further evidenced by a substantial decline in the net inflow of institutional funds and persistent drops in stock prices across the sector. As of W51, the average decline in the pig sector was 10.73% week-on-week (WoW), further highlighting the formidable challenges facing the Chinese pig-raising industry.

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