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Update on China’s Hog Prices, Red Meat Imports

China’s live hog prices continued to increase slightly through mid-August, reaching 15.96RMB/kg ($1.18/pound) on Aug. 21 – an increase of 9 percent from a year ago. Piglet prices also continued to trend higher, up 4 percent to 29.81 RMB/kg ($2.21/pound). At the same time, sow prices were down 3 percent to 32.04 RMB/kg ($2.37/pound).

Farm profitability has improved compared to last year and early 2013, so strong demand for restocking could partly explain the higher piglet prices. Low sow prices come at a time when the sow inventory is expected to decline. China’s third quarter hog output was estimated at 171 million head, down slightly from the same quarter of 2012. However, strong piglet restocking demand is expected to boost feed demand and hog/pork output next year. In the near-term China’s hog and pork prices are expected to be supported by seasonally stronger pork demand (beginning with the Mid-Autumn Festival), which could offset the expected increase in hogs to market and pork production with the onset of cooler temperatures. It is uncertain how much the heat-related stress has negatively impacted hog production, so there is potential for tighter-than-expected supplies heading into the high demand season.

Higher domestic prices bolster China’s pork imports
As China’s hog and pork prices have improved, pork imports have gained momentum (the chart below shows the strong correlation between China’s import demand and domestic hog prices). China/Hong Kong’s combined pork/pork variety meat imports in July totaled 158,859 mt, up 46 percent from a year ago and the largest volume since January. For January through July, total imports were up 4 percent to 958,731 mt (excluding Hong Kong imports from China and Hong Kong re-exports). This growth was due to an 11 percent increase in variety meat (516,571 mt) more than offsetting a 3 percent drop in the pork category (442,160 mt) which includes some items (hocks, for example) other than muscle cuts.

Chart comparing China/HK Pork & Variety Meat Imports and China's Live Hog price from January 2010 through July 2013 in metric tons and the price by the pound in dollars
Exports to China/Hong Kong by the region’s top pork suppliers were up 8 percent (to nearly 900,000 mt) in the first half of this year, but the United States lost market share in China to the EU and Canada as the ractopamine-related restrictions negatively impacted U.S. exports. U.S. market share was 22 percent, down from 24 percent last year. The EU accounted for 59 percent of exports to the region, up from 51 percent in the first half of 2012. Canada’s market share increased from 8 to 10 percent, Brazil was steady at 7 percent and Chile improved from 1 to 2 percent. With China’s prices on the rise there is potential for continued strong exports to the region through the end of the year and into the first quarter of 2014. Because EU prices are also on the rise, the U.S. should benefit from China’s growing import demand.

hina/HK Pork & Variety Meat Monthly Imports in Metric Tons from January 2008 through December 2013
July beef imports set another record
China/Hong Kong’s combined beef/beef variety meat imports hit another record in July at 98,962 mt, up 138 percent from last year and driven by strong growth from all suppliers including Brazil (41,196 mt, +104 percent), Australia (17,328 mt, +329 percent), U.S. (12,664 mt, +132 percent), Uruguay (9,060 mt, +247 percent), New Zealand (5,100 mt, +154 percent), Argentina (4,422 mt, +110 percent), and Canada (2,903 mt, +30 percent). Trends are similar for January through July, with combined imports of 556,099 mt (+114 percent). The U.S. (59,374 mt, +115 percent) was the region’s third-largest supplier after Brazil (221,805 mt, +68 percent) and Australia (95,700 mt, +337 percent). The U.S. slipped to third this year as direct shipments to China have surged for both Australia and the region’s No. 4 supplier Uruguay (51,141 mt, +247 percent). China remains closed to beef from the U.S. and Brazil.

Hong Kong & China Monthly Beef/BVM Imports in Metric Tons from January 2011 through December 2013 Chart comparing China's Monthly Beef Imports in Metric Tons from January 2011 through July 2013 with several other countries including Australia, New Zealand, Uruguay, Canada and more
Sheep meat imports, prices remain strong
China’s sheep meat imports have also surged this year, but have been a bit more sporadic than its beef imports. After a record-large June (32,074 mt), July imports (13,694 mt) were the smallest since February but still up 24 percent year-over-year. January-July imports reached 145,863 mt, up 110 percent from a year ago. Imports are primarily from New Zealand and Australia but Uruguay has been making inroads into the market.

New Zealand’s free trade agreement with China has helped it account for 59 percent of sheep meat imports (85,635 mt, +97 percent from a year ago), followed by Australia (56,378 mt, +126 percent) with a 39 percent share and Uruguay (3,851 mt, +300 percent) with 2.5 percent. China’s mutton prices are 20 percent higher than a year ago at about $4.60 per pound. This is even higher than the average beef price of $4.40 per pound, which is up 30 percent from last year.
Chart comparing China's Monthly Sheep Meat Imports in Metric Tons from January 2011 through July 2013 with Australia, New Zealand, and Uruguay.
(Sources: Boyar Ag News, Global Trade Atlas and USMEF estimates)