Is China moving back in? 🇨🇳

swine o'clock Aug 09, 2022

No, the country isn’t returning home after crashing on a friend’s couch for a couple of weeks. The question is whether China is moving back into the U.S. pork market. The best guess is yes, and in a meaningful way sometime this fall, as prices ease downwards and production increases. Hog prices are up substantially in China, presumably because production is dropping as massive herd liquidation is being completed and baby pig prices are rising. The facts evidence the drop-off in pork production and the return of profitability, and that another expansion may have begun

  • In the last week of July, U.S. pork export sales were up 35% and China was a buyer of 54% of the total sales – the rest being split among Mexico, Japan, South Korea, and Canada.

Nevertheless, it’s worth mentioning that year-to-date overall pork exports out of the U.S. are down 18% compared to the same period last year, while imports are up 43%

  • Pork trade with China is down 38 million pounds; trade with Colombia is up 15 million pounds; and up 11 million pounds with both Mexico and the Dominican Republic.

Recent activities in U.S. hog prices have been characterized by strong competition and strong domestic demand, despite poor export demand. 

  • The seasonal behavior in pork prices in the transition from summer to fall is to have prices lowered due to increased production and, eventually, increased export demand. 

Pig prices and hog futures should remain elevated for the foreseeable future because, for the first time in modern history, the industry has witnessed a simultaneous contraction in China, the European Union, and the United States. 

  • Global pork production should decline substantially into 2023, just as U.S. beef production is dropping sharply, so it's highly possible that lean hog futures in the summer of 2023 will experience record high levels.

We’ve talked about the Chinese situation here before, and you can check it out here for previous updates and what has led us to this point.