The size of China’s hog herd – one of the most important numbers in agriculture - “may take several years” to regain levels seen ahead of the African swine fever epidemic Genus said, noting further outbreaks of the disease.
China’s pig numbers - which thanks to the virus plunged from 441.6m head at the start to 2018 to 310.4m head two years later on US Department of Agriculture estimates - have been recovering fast, with Beijing officials this week estimating that hog stocks will in the first half of this year return to pre-epidemic levels.
“As expected, larger producers are rapidly growing capacity to rebuild China’s pig herd,” animal genetics group Genus said on Thursday, adding that the “herd recovered significantly in size through 2020”.
‘ASF outbreaks continue’
However, the group added, that a “full recovery may take several years”, noting that “ASF [African swine fever] outbreaks continue”, and that the disease “continues to be a major influence on China’s porcine industry”.
The comments tally with observations from some market commentators, with Kar Setzer at US broker AgriVisor noting “doubts” over Beijing’s latest statement.
“Not only is ASF resurging in the country, but we are seeing other disease outbreaks as well. This has led to several of China’s hogs being culled, especially sows.
“As a result, it is believed that is may be well into 2022 before the Chinese hog herd can rebuild.”
Benson Quinn Commodities earlier this month noted that while reports were initially “pushing ASF” as a fresh disease risk to China’s hog herd “they have shifted to PED”, or porcine epidemic diarrhoea, adding that “both are bad diseases”.
Big imports – but of what?
The fate of China’s swine herd - which the USDA estimates started 2020 accounting for half of the world total - is being closely watched in both crop and livestock markets, as a determinant of the levels of imports of grain the country will need to feed its pigs, or pork purchases to replace lost domestic output.
The surge in China’s corn imports this season has been attributed largely to the need to feed its recovering swine herd, at a time when domestic stocks of the grain had been run down, with the quest for rations too behind the country’s status as by far the top soybean importer.
The country’s pork imports, meanwhile, have soared from 1.19m tonnes in 2018 to 4.39m tonnes last year, according to Chinese customs data.
‘Keeping pig prices inflated’
Genus said that the prolonged period China will need to rebuild its herd will mean “keeping pig prices inflated and supporting higher pork imports than pre-ASF.
“While pig prices in China are down around 8% compared with a year ago and down 20% from their 24-month peak, they are around 150% higher than prices than pre-ASF.”
“Pig prices are expected to moderate, but remain above historical levels, in the coming months in China.”
Last week, Steiner Consulting too noted that Chinese “prices for hogs, pork and baby pigs remain at elevated levels despite all the talk of supply recovery”, viewing that the “high prices are still needed in order to ration out demand”.
“Piglet prices in China remain at sky high levels and suggest that producers remain intent on trying to rebuild,” the analysis group said, with the push encouraged by pork prices in China which, while down 12% year on year, stand at 110% of levels two years ago.
The comments came as UK-based Genus reported earnings for the July-to-December half up 26% year on year at £30.3m, on revenues up 5.5% at £285.7m.
Operating profits in the pig genetics division rose by 10.0% to £68.9m, including joint ventures, despite “unprecedented volatility” brought to the US market by Covid-caused abattoir shutdowns.
The group added that “while recent increases in corn and soybean prices are expected to have some impact on farmers’ profits, buoyant lean hog futures point to profitable margins for producers in 2021”.
In bovine genetics, operating profits soared by 28% to £18.7m, “as dairy customers continued the shift from conventional to sexed and beef genetics”, said Genus, which said it owned “over 50 of the top 100 Holstein bulls globally”.
Nonetheless, Genus shares dropped 6.9% to 4878p in London, after the group said that its growth in the second half of its financial year, to June, be would “lower than experienced in the first half”, noting too “increased currency headwinds”.
Broker Peel Hunt said: "The company expects to deliver in line with expectations in the current year in constant currency.
“However, currency headwinds have increased materially, resulting in a circa 3% reduction in forecasts."