An historic three-year decline in China's hog numbers – one
of the most important dynamics in world agriculture – is to drive pork imports
to a record next year, but bodes ill for hopes of booming corn prices.
US Department of Agriculture staff in Beijing ditched
expectations of China's hog herd, which accounts for roughly half the world
total, returning to growth this year, despite efforts by the government to
support profitability, by for example buying pork for cold storage.
A drive to promote commercial pig farms, at the expense of
inefficient backyard operations, face "difficulties with obtaining land," besides
the tight grain supplies and higher grain prices testing peers worldwide, the USDA
Furthermore, heavy flooding in July and August in major hog
producing areas, including Sichuan, Hunan and parts of Guangdong "delayed feed
delivery and caused producers to slaughter animals earlier than expected to
avoid losses, despite lower weights".
As a further dent to domestic producers, who face particularly
high domestic feed prices, their pork is more expensive than imported supplies.
"Reportedly, the import unit price for pork was 48% cheaper
than domestic prices," the USDA bureau said.
Chinese hog numbers and (year on year change)
2013: 465.95m head, (-692,000)
2012: 466.64m head, (-6.70m head)
2011: 473.34m head, (-3.78m head)
2010: 477.12m head, (+7.16m head)
2009: 469.96m head, (+7.05m head)
2008: 462.91m head, (+23.02m head
Sources: USDA, USDA attache report
Furthermore, food safety scares are boosting the appeal of
foreign supplies, with Chinese buyers "switching to imported pork products
because of constant reports of domestic food safety violation cases from
well-known pork processing plants".
The bureau forecast a drop of 6.7m head in China's hog herd
this year, to 466.6m, and put a small decline in 2013 on the cards too, in its
first estimates for next year.
The numbers predict a drop of 11.2m head between the end of
2010 and the close of next year, in the first three-year run of declining herd
numbers on records going back to the 1970s.
Good news for pork exporters
The drop in hog numbers bodes well for pork exports from the
US, expected to pick up more than 40% of China's import orders next year, and shippers
from European Union countries, such as the UK, gaining increasing access to the
world's biggest pork market.
The USDA bureau lifted to a record 799,000 tonnes its
forecast for China's pork imports this year, enough to promote the country to
the world's third-ranked buyer, after Japan and Russia.
Next year, China's imports will hit 840,000 tonnes.
But the reduced need for feed implied by the herd forecasts may
herald revisions to estimates for China's needs for corn and soybean imports,
purchased largely to feed hogs.
Rabobank on Wednesday forecast that China's corn imports
could hit 20m tonnes a year "within a five-year timeframe" if it can expand its
pork production sufficient to avoid the need for exports.
Chinese pork imports
2013: 840,000 tonnes
2012: 799,000 tonnes
2011: 758,000 tonnes
2010: 415,000 tonnes
2009: 270,000 tonnes
2008: 709,000 tonnes
Sources: USDA, USDA attache report
"We hold the view that China has the potential to maintain
self-sufficiency of pork supply in the long term," the bank said.
"However, there are many challenges in achieving this
success, such as the continuation of disease problems, food safety issues,
logistics and the lack of a cold chain."
"China will be an importer of pork and corn for the
foreseeable future, but how much of each will depend on improvements in the
Corn imports of 20m tonnes would represent a huge uptick
from the 2.0m tonnes forecast for 2012-13, and likely place China as the world's
top importer, ahead of Japan, which buys 15m-16m tonnes a year.