Looking at the size of the breakdown of the inventory for February 2011—breeding stock was around 47.4 million and total on farm inventory was about 445.1 million head (as compared to 46.6 million sows and total on farm inventory about 455 million head in November 2010).

Sow inventory reached 47.4 million head in February, down 0.17 per cent from December and down 2.7 per cent compared to one year ago. Sow inventory had increased in September, but decreased through October and November, a marginal increase in December and then slightly lower in January 2011. For February, sow inventory was 10.65 per cent of the live hog inventory and this is up 0.2 points from January and down .05 points from one year ago.

Average live hog prices in February the price reaching just over 14.83 RMB/kg. liveweight (approx. $1.03 US/lb. liveweight) were up from December (the average price reaching 13.92 RMB/kg. liveweight (approx. $0.95 US/lb. liveweight). The average monthly live hog price in South China, East China, and Middle China reached over RMB 15.2/kg. during this timeframe. The greater rise of prices in the south is mainly due to increased demands for pork for use during the Spring Festival. (The highest weekly price in February for South China and Middle China was over RMB 16.0/kg, up 2.0 RMB/kg from one week before mainly influenced by the Spring Festival).

For the first few months of 2010, the market price declined, levelled off and then since last spring has mainly increased. Profit margins during the spring were at a loss for most large-scale farms. With the increasing market price, the profit margins have gained significantly (100 RMB/market pig for July-$14.90 US; 140 RMB/market pig for September-$20.90 US; and 260 RMB/market pig for November-$39.03 US. February, 2011 again shows an increase in profit margins to 304 RMB/market pig -$46.27 US. This was a substantial increase from January when the profit margins were closer to 204 RMB/market pig- $31.05 US.

The February average profits for those who purchased piglets from the market gained 281.5 RMB/head-$ 42.85 US, up 38.5 RMB/head-$ 5.86 US from December. Small and backyard farmers (self-sustained farmers) gained 304 RMB /head-$ 46.27 US in February, up 84.0 RMB/head-$ 12.78 US from December. The national piglet prices averaged 22.04 RMB/kg-$ 1.52 US/lb.in February, up 1.20 RMB/kg.-$ 0.08 US/lb. from January.

Short term scenario:Farmers’ have high expectations that the market price will increase through March, 2011 and into the mid-summer. (throughout 2010, the inventory of live hog and fertile sows declined and now overall supply is tight-disease played a major role in 2010 as “summer fever“ caused death, reduced fertility and caused lower piglet survivability). From the aspect of the whole sale and retail market, trading is light. After Spring Festival, the retail price declined slightly and pork demand is weak.

During March, the pork demand will increase slightly with the return of students to universities and colleges and of workers to urban construction sites. Following the concentrated slaughtering before Spring Festival, February and March are the traditional inventory peak periods. Millions of small farmers will actively restock and thus piglet demand will also increase. Current piglets’ pricing indicates that there are fewer piglets for restocking. That is why the piglets’ price averaged RMB 23.8/kg-$ 0.74 US/lb. in February, up RMB 3.80/kg-$0.26 US/lb. or 20 per cent from before Spring Festival. Right now the farmers are keen on restocking.

The cost of feed, labour and transportation has all increased throughout 2010.

What to watch for over the next few months!!!

• The pig and grain (corn) ratio in December was at the profitable level of 6.7:1. In February, the pig and corn ratio was 7.12:1 and was 7.07:1 for March. With continued Government incentives and “good profit margins“, pig expansion in China will continue.
  
  
• In November 2010, imported fresh and frozen pork reached 24,100 MT, up 66.7 per cent from October, and up 78.7 per cent over the same period last year. In January, the fresh and frozen pork imports reached 28,700 MT, up 1.4 per cent from December, 2010 and this is up 87.2 per cent over the same period of last year. China has been importing about 25,000 MT of fresh and frozen pork during the past three months. The imports from America reached 11,100 MT, up 8.0 per cent from last month. The imports from Canada reached 6,500MT, down 15.1 per cent from last month, but up 1.25 times over the same period from last year. The imports from Denmark reached 2,400 MT, up 8.2 per cent from last month, but down 46.1 per cent over the same period of last year. Will this trend continue or will Brazil become a major exporter into China? In early April, China authorized three Brazilian pork producers for the first time to export pork into China. The Brazilian export association (Abipecs) considers the Chinese market could take about 200,000 tonnes/year.
  
  
• On 17 March 2011. AQSIQ (the Administration of Quality Supervision, Inspection and Quarantine) reopened the China market for pork and pork products from the USA. For nearly 2 years the border for pork into China has been closed caused by H1N1 trade constraints. So, now all of the major pork exporters (USA, Canada, Denmark, France, Spain, Brazil and other European countries) will be vying for the lucrative China pork share. At the same time, the National Government will want to limit pork imports so as to maintain domestic profitability. The balancing act will be quite interesting over this summer.
  
  
• As mentioned before and in China, the largest imports of soybean have always been from the US. Since China began importing soybeans from the USA, the imports reach the highest of 21.8 million MT in 2009, accounting for 51 per cent of national total in 2009. But, the imports from USA stand at 18.7 million MT from January to November(2010), taking up 38 per cent in the total; while the imports reach 30.6 million MT from South America mainly from Brazil, Argentina, and Uruguay, creating the highest in history. The final count for all soybean imports was about 50.3 million MT for 2010. This has created some alarm. Domestic production was only about 22 per cent of self-sufficiency rate (the government feels more comfortable with a minimum of 30 per cent self-sufficiency rate). Can and/or will the government divert more cropland into soybean plantings?
  
  
• Already, in January, China signed a $6.68 US billion soybean sale for about 11.7 million tons (10.62 million MT) with the USA. From this, the US Department of Agriculture in their February 24th agricultural trade outlook, are projecting $20 billion in soybean sales to China in fiscal year 2011.
  
  
• China will likely increase soybean imports by at least one third more by 2014 (66.9 million MT, a 16.6 million MT increase in 3 years). As a comparison, this increase would take more than all of the soybeans produced in Iowa in 2010 (13.5 million tons- 12.25 million MT). China is expected to buy 60 per cent of the globally traded soybeans in 2011/12 and this is double what China purchased just four years ago.
  
  
• Fu Bingtao, an economist with the Agricultural Bank of China-ABC-in Beijing, reports that the price of grains that are closely linked to the price of food would rise by 10 per cent in 2011. This is on top of the 11.7 per cent rise of grains in 2010. The danger is that higher food prices along with increased inflation pressures will cause concern with the Government. The People’s Bank of China raised interest rates for the 4th time in six months on April 5th. Consumer prices had climbed 5.2 per cent in March from one year previous. Of this, food inflation reached 11 per cent in February. The Government goal is 4 per cent. Again, a balancing act between grain for food and/or livestock; imports of pork versus domestic production and pricing and response to inflation data.
  
  
• It is estimated that the average Chinese citizen will consume 39.3 kilograms (86.6 pounds of pork this year). This compares to the 19.7 kilograms (43.4 pounds) in 1990 (USDA data). The Chinese like pork—would it not be grand, if we could achieve the same consumption results in North America???
  
  
• Clenbuterol. Originally, it was banned for use with swine in 2002. However, it is still in use, illegally. There were about 18 reported cases of food-related clenbuterol poisoning between 1998 and 2007 (Shanghai Food Safety website). However, on March 15th, China’s largest meat producer, Shuanghui (Shineway Meats) sold pork that contained clenbuterol. Products were quickly removed from supermarket shelves as consumers saw another food contamination scandal similar to the 2008 melamine scare in the milk from most of the major milk processors in China. From this scare, Shuanghui has claimed total losses approaching 20 billion RMB ($ 3.05 billion US), but the confidence in their product and market share has been initially eroded and it may take several months to recapture the consumers’ choice. The middle class consumer is more interested in food safety than food security and their buying power is rapidly increasing in China.