Chinese piglets prices jump on supply disruptions

0


Supply disruptions from the coronavirus epidemic have pushed China’s piglet prices to record highs, as farmers bet that a domestic pork shortage will persist even after the country’s economy gets back up to speed.

China, the world’s biggest producer and consumer of pork, saw its domestic hog herd shrink more than 40 per cent last year and production drop more than a fifth, as African swine fever tore through farms.

As of January, Chinese pork prices were up 116 per cent year on year, even as Beijing attempted to cushion the blow during the lunar new year holiday by releasing 10,000 tonnes of pork from state reserves.

Beijing released another 20,000 tonnes of frozen meat on Thursday while agriculture ministry officials told reporters that “despite the impact of the coronavirus epidemic . . . we are confident annual production of hogs will fundamentally recover [in 2020]”.

But the cost of pork at wholesale markets in China has climbed 16 per cent so far this year as measures to contain the coronavirus outbreak have disrupted supply chains vital to shipping pigs from farm to market.

And prices for piglets, which take about six months to grow large enough for slaughter, have jumped to a record Rmb84 ($12.1) per kg on surging demand from farmers, who believe pork prices will stay high or even climb further this year.

Line chart of Rmb per kilogramme showing Chinese pork prices surge as epidemics disrupt supply

Ernan Cui, a China consumer analyst at Gavekal Dragonomics, said the country’s pig herds would remain under threat from swine fever because biosecurity standards at many farms remained below levels that would fully halt the spread of the disease.

Ms Cui added that while coronavirus control measures had constrained the availability of pork and potentially made hog farming more lucrative in the short term, “it’s still a risky business right now”. Farmers who had restarted production, she warned, might see their herds once again destroyed by a disease now endemic to China.

Chinese hog herds may also be at risk of infection from wild boars, which have long been a major concern for Europe’s pork industry but have not, until now, acted as key carriers of the disease in China. On Tuesday, the agriculture ministry confirmed seven infected boars had been found dead in a forest in Hubei province — also the centre of the country’s outbreak of coronavirus.

Michelle Lam, Greater China economist at Société Générale, said the Chinese government had prioritised restoring transportation logistics to normal as part of a push to help the economy recover from severe disruption in the first quarter.

That means upward pressure on pork prices could ease within a few months, but not that prices will actually fall any time soon, she said. At best, she estimated the cost of hogs might begin to edge down around the middle of the year.



Source link

Get real time updates directly on you device, subscribe now.