Pork prices to stabilize in long term on fresh supplies

Rates set to taper down in China after year-end, festive demand, says expert 

The prices of pork, which accounts for more than 60 percent of China's meat consumption, are expected to remain high for some time due to the busy sales season during the New Year's day and the Spring Festival, but will remain stable in the long term with little room for further growth, an industry expert said.

The average wholesale price of pork was 48 yuan ($6.9) per kilogram on Nov 15. That is down from 50 yuan per kg in the week earlier, but still higher by over 150 percent from a year ago, according to the Ministry of Agriculture.

An African swine fever outbreak has resulted in a shortage of more than 10 million metric tons of pork, or at least 20 percent of China's total pork output this year. It will take about six months for a recovery in the pig production capacity and breeding new pigs.

"The recent drop in pork prices is a result of several reasons. Some of the pigs that were fostered earlier are ready for slaughter, while more frozen pork products are exiting warehouses. Besides, farmers tend to sell when prices are falling and they stop keeping the stocks," said Zhu Zengyong, a pork analyst at the Chinese Academy of Agricultural Sciences.

"In the fourth quarter, poultry products are expected to witness a better growth rate, while beef and mutton output will grow steadily," he said.

More frozen pork will be put on the market as a leverage to stabilize pork prices. Higher pork imports are also expected to guarantee domestic supplies. In addition, more than 20 provinces and municipalities have introduced policies to ensure adequate pork supplies, such as offering subsidies and easier financing to pig farms.

"Before the end of the year, pig production capacity may stop dropping and begin to rebound, buoyed by government policies and market stimulus," Zhu said.

Traditional pig industry players are increasing their production by various measures, such as speeding up the construction of pig breeding projects and starting full-load production to increase pork supply and curb surging prices in China.

Guangdong-based Wens Foodstuff Group Co Ltd, China's largest pig breeder, is expanding its breeding scale, and aims to accelerate slaughtering, food processing and fresh meat sales to increase pork supply, it said.

In October, the company sold 894,300 pigs, up 0.71 percent month-on-month, but down 52.87 percent year-on-year. Wens said the sales decline was mainly attributed to an adjustment of seedling growing and sales in the first six months of the year. This month, producer is increasing the selection of breeding sows and the weight of pigs.

Last month, sales of pigs by Wens reached 3.86 billion yuan, expanding 36.36 percent month-on-month and 27.15 percent year-on-year. Its average sales price stood at 36.19 yuan per kilogram, adding 25.97 percent month-on-month and 153.79 percent year-on-year, the company said.

"The sales growth is mainly due to the tight domestic supply pigs and the increase of the average sales price of our own pigs. Facing the current situation, we have taken various measures to improve the local supply of pork and chicken," the company said.

Shares of Shenzhen-listed Wens fell by 0.06 percent to 36.6 yuan per share on Tuesday.

Henan-based Muyuan Foods Co Ltd, a major pig breeder, said in recent months, the company is accelerating the production of some idle sows in the early stage, and a large number of sows will be reserved for the expansion of production next year.

Besides, to increase supply, Muyuan has taken measures to increase the weight of commercial pigs in a reasonable range. Shares of Shenzhen-listed Muyuan edged up by 3.36 percent to 95.68 yuan per share on Tuesday.