China can import 50% less pork and cool global cost

Bloomberg Newssex., July 16, 2021 8:12 AM·3 minute reading

(Bloomberg) -- China's record demand for pork from other countries could plummet in the face of sharply falling domestic prices, which would potentially ease pressure on the world meat market and cool at least a component of global food costs.
The biggest pork importer on the planet could reduce purchases abroad by more than 50% in the period from July to December compared to the first half, because the supplies in the country are now cheaper than international ones, said Jim Huang, who runs China-America Commodity Data Analytics, an independent consultancy focused on agriculture.

Global pork benchmark futures are up more than 25% in Chicago this year due to strong demand and higher feed costs. In contrast, pork prices in China have fallen by more than 50% due to increased supply, with the replacement of herds after the impact of the African swine fever. US pork is now more expensive than Chinese pork discounting tariffs and shipping, Huang said. It also means that the government can replenish state reserves at a lower cost in the local market.

The drop in Chinese demand for foreign pork could be good news for consumers around the world. Higher prices for meat, grains and edible oils have helped push global food costs this year to the highest level since 2011, bringing fears of inflation amid the global battle against the pandemic.

As an example of the increase in local supply, pork production in China jumped 36% in the first half compared to the previous year, to around 27 million tons, while the number of pigs rose almost 30% to 439 million tons. at the end of June compared to the previous 12 months, according to data from the statistics department on Thursday.

During the whole year of 2020, China imported a record 4.4 million tons of pork, more than double the previous year, while in the first five months of this year purchases abroad rose about 14%, to almost 2 million tons, according to official customs data. Spain, Brazil and the United States were the main suppliers.

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The government no longer needs to import pork into state reserves after falling local prices, said Lin Guofa, senior analyst at consultancy Bric Agriculture Group. China is now buying domestically, having purchased 13,000 tonnes this week and 17,000 tonnes the week before.

Until the beginning of the year, the government was selling pork from stocks to cool the market, as African swine fever had cut the number of hogs almost in half, which boosted prices. The Beijing government released 670,000 tonnes from state reserves in 2020, equivalent to about 15% of the amount of pork imported that year.

While the country's demand for foreign pork is expected to decline in the second half, the story is different for beef. International beef purchases are unlikely to change from the first six months of the year due to domestic shortages and high prices, according to Lin of Bric.

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