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Chinese pig herd rebuild to impact global red meat demand

Official statements from China’s National Bureau of Statistics (NBS) last month are that the pig herd grew by 31% in 2020; and breeding sow numbers have surged 35%, putting the pig herd at 407 million head as of the end of 2020. However, 2020’s pork production was low, and pork prices are still high, so pork supply is still clearly tight.

Over the past few years, the big story in the animal protein markets has been the huge impact that African swine fever (ASF) decimating the Chinese pig herd has had on world meat prices of every persuasion.

A couple weeks ago, the Chinese National Bureau of statistics made an announcement about the grand success of the Chinese economy over the course of 2020. Within it, was a key statement that the overall swine herd was up 31% from 2019, with the all-important breeding herd having risen 35%.  The last official figure on the Chinese pig herd released back in January 2020 was 310 million head. The end of 2020 figure is just 5% below 2018’s level of 428m (Figure 1).

Another thought-provoking statistic coming out of the  release was that total domestic animal protein production from beef, mutton, poultry and pork for 2020 was 76 million metric tonnes (mmt) (figure 2), only down a whisker (<0.1%) from 2019; but 10mmt (12%) below 2018 pre-ASF levels.

Pork production, which is the figure we are most interested in because of its currently diminished, but not down and out status, accounted for 41 mmt; 3% shy from 2019 figures. However, compared to 2018, at 54mmt (figure 2), it’s still down by 13mmt, or 24%.

That said, given 2019 was host to a crippled pig herd, production levels in 2020 still being below what was a very bad year for the Chinese pig industry doesn’t look that good in comparison- so where did all the pork go?

Two factors potentially explain it- the bulk of the massive ASF pig cull occurred through the middle of 2019, so the end stock number would have been much lower than the annual average. Secondly, the temporary practice of retaining females into the breeding herd previously bred for slaughter displaced meat production. The meat to herd ratio of 10% in 2020, well below the 12.5% it was tracking at pre-ASF is reflective of these issues. We might see some efficiency issues going forward because of weaker genetics, but probably not for that long given the short generational cycle in pig farming and breeding, and imports of quality European breeding hogs over 2020.  

Looking at where Chinese pork prices are tracking, we can see in Figure 3 that despite the apparent increase in the pig herd, that 10mmt protein gap in annual domestic production and the herd rebuild is still creating elevated pork prices at 46RMB/kg (~$9 AU) which are little different to the height of the protein crisis.

Meat retail prices tend to be “sticky” and loathe to come down after a rally. China is clearly still short of meat, and the situation can be expected to continue for a while into 2021, creating demand for imports, including Australian beef & lamb, but for how long is the question?

A sharp dip in Chinese pork prices, and corresponding fall in import volumes will officially signal the end of the ASF driven bonanza. However, if we are lucky, a potential silver lining to soften the blow may include a permanent increase in demand for beef and lamb in China if there has been a shift in tastes & preferences toward red meat.

What does it mean?

China’s pig herd may have almost fully recovered, but total meat production in 2020 was still 10mmt (-12%) short of where it was in pre ASF 2018. We can see the ongoing impact of this shortage when we look at the low pork production figures, but more tellingly, Chinese pork prices are still at double 2018 levels. With the herd mostly back, pork supply should increase, and prices drop in China as 2021 progresses, so reliance on imported meat will necessarily fall, most likely translating to lower international prices for beef & lamb.  

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Key Points

  • Chinese Pig herd up to 406m head- 5% below normal, breeding herd up 35.1% in 2020
  • At 46RMB/Kg, (~$9AUD) Pork Prices in China still at double pre-ASF levels
  • 2020 Chinese pork production was still 13mmt below normal levels. 

Click on figure to expand

Click on figure to expand

Click on figure to expand

Data sources: China NBS, Reuters, Mecardo

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