High local production costs will keep Chinese pork imports heavy

CHINA – Chinese pork imports are set to remain heavy for the years to come, thanks to the high cost of domestic production, and the fact that official hog herd figures may be significantly overstated, US officials said.

A report from the US Department of Agriculture saw a number of barriers to expansion of the Chinese hog sector, the world’s biggest, which will keep domestic prices high, and imports brisk.

“China-US comparisons show that hog producers in China face higher feed and labor costs than US producers,” the USDA said.

“With rising production costs, constraints on land use, and stricter environmental regulations in China, the country is likely to remain a large importer of pork.”

“China has become a leading importer of pork as its hog production costs have grown,” the USDA said.

The USDA sees Chinese pork imports more than doubling year-on-year in 2016, to 2.40m tonnes.

This is up from just 53,000 tonnes ten years ago, when Chinese pork prices started to diverge from US prices.

Imports are currently seen easing only slightly, to 2.30m tonnes, in 2017, still the second-highest level on record by a huge margin.

China’s domestic pork prices are being pushed up by rising production costs for the country’s hog industry.

“China’s emergence as a pork importer reflects growing resource scarcity as the nature of hog production there undergoes dramatic change,” the USDA said.

The twentieth-century boom in Chinese pork production was driven by small and backyard producers, taking advantage of a huge pool of rural labor.

But this rural labor supply is shrinking, due to increased urbanization and falling birth rates, forcing a rationalization for the industry.

“China’s hog industry is now in an era of rapid consolidation similar to that experienced by the United States during the 20th century,” the USDA said.

“While wages are also much lower in China than in the United States, the withdrawal of labor from hog farming and consolidation of farms in China is likely to continue.”

The consolidation of the industry is also lifting feed costs, as grains, oilseed meals, and commercial feed costs replace traditional low-cost fodders.

And given the high price of grains and oilseeds in China, feed costs are well above those in other producing countries.

Although the government is allowing the supported corn price to fall, the USDA said feed costs for Chinese hog farmers would remain above those paid by overseas competitors.

Constraints on land use are also restricting the expansion of the hog industry.

The USDA also noted ideas that Chinese pork production figures could significantly overstate the scale of domestic pork production, due to exaggeration by local officials.

Some analysts have concluded that pork production figures overstated the scale of pork production by some 25% between 2004 and 2010.

“While China’s hog production is almost certainly much larger than that of the United States or any other country, [production] could be significantly overstated,” the USDA said.

January 18, 2017; http://www.agrimoney.com/news/high-local-production-costs-will-keep-chinese-pork-imports-heavy–10353.html

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