Chinese pork imports to hit record, on hog decline

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 bureau said,

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".

'Food safety violation cases'

As a further dent to domestic producers, who face particularly high domestic feed prices, their pork is more expensive than imported supplies.

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

"Reportedly, the import unit price for pork was 48% cheaper than domestic prices," the USDA bureau said.

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.

Corn implications 

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.

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

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.

"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 supply chain."

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.

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