This also shows growth since May 2011—breeding stock was around 47.1 million and total on farm inventory was about 453 million head). The 476.25 million head for November is up 2.82 per cent from last year while the November sow inventory is up 2.01 per cent from last year (year over year). A steady increase in sow inventory has occurred since March 2011.

For the week of 12 to 18 December, the national average market pig price was 16.39 RMB/kg ($ 2.59 US/kg) liveweight; the average piglet price was 27.42 RMB/kg ($ 4.34 US/kg) liveweight; the average corn price was 2.21 RMB/kg ($0.345 US/kg); the average soybean meal price was 3.21 RMB/kg ($0.508 US/kg); pig and corn ratio is 7.42:1 and the average pork price was 22.95 RMB/kg ($3.63US/kg). The average pork price is up 1.10 per cent from last week.

Profit margins continue to show good returns. Estimated profit margin for June 2011, was around 770 RMB/market pig -$119.10 US and was the peak price. Profit margin for August was estimated to be 721 RMB/market pig -$112.83 US. Profit margin for October was estimated to be 659 RMB/market pig -$103.62 US. Profit margin for November was estimated to be 447 RMB/market pig -$ 70.06 US. For December, the profit margin is estimated to be 520 RMB/market pig -$ 82.27 US.

Price /profit predictions for 2012 include: pig price of 16.6 RMB/kg liveweight ($ 2.60 US/kg liveweight); average price of corn at 2,500 RMB/tonne ($ 391.85 US/tonne); pig and corn ratio of 6.93: 1 and average profit of 350 RMB/market pig ($ 54.86 US/ market pig).

Short term scenario

Industry estimates that pig prices will not fall to much further for the next few months ( through Spring Festival (23 January 2012) and many predict that the price will stabilize to around 18 RMB/kg liveweight ($2.85 US/kg liveweight). There are several recent trends to support this optimism.

1. Tight supply as small backyard farmers exit from the market and farming in general and relocate to the large urban centres to work. (China Ministry of Agriculture just released the next 5 year plan for agriculture development-12th Five-year Plan (2011-2015). It is estimated that 40 million rural labourers will leave farm jobs during this five years—many of them were former backyard pig farmers).
   
   
2. Large farms are not able to keep up with the demand.
   
   
3. During the past year, a piglet diarrhea has caused high mortality (especially 10 day old pigs). Initially the disease was noted in the southern part of China. During December, 2010 to March 2011, the problem was prevalent. Many sows were rebred in the Spring of 2011. This has caused part of the decrease in the current price as the market pigs from the rebred sows are now coming to market (predicted large short-term slaughter). However, this increased supply may taper off over the next few months.
   
   
4. Because of the fear of the piglet diarrhea occurring again this December period, many farmers are selling their stock to avoid repeat losses.
   
   
5. Again, but more recently (July and August) in the North Central parts of China a similar problem has occurred as a wet July and August, lead to more farms having a high piglet death loss. This could cause lower pig supplies around the increased demand period just prior to Spring Festival (this could cause a spike in market pig prices).
   
   
6. The next month represents a "comparatively concentrated" holiday season starting with the Winter solstice (21 December), then Christmas (25 December), New Year (1 January) and the Chinese Lunar New Year ( 23 January). This puts pressure on supply.

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

• In February, 2011, the pig and corn ratio was 7.12:1; was 7.07:1 for March and was 7.63:1 for May. In September, the ratio was 8.24:1 and in October, the ratio was lower to 7.45:1 per market pig. Now for November, 2011, a pig to corn ratio of 7.42:1 is shown. This is slightly lower than last month, but analyst believe that this ratio will be maintained at this level for the next while. A pig to corn ratio of 6:1 is considered to be break even. With continued Government incentives and "now reasonable profit margins", pig expansion in China will continue.
  
  
• The Consumer Price Index (CPI) continues to be quite interesting for the National Government. Previously, when the pork prices were gaining, this rapid increase in pork, gained the attention of the National Government as it greatly affects the CPI. The CPI is made up of about 30 per cent food found in the consumers’ basket. Pork is estimated to be about 1/3 of the food portion of the basket or in other words, about 10 per cent of CPI as a whole. Just to sense the impact that pork has on the CPI, reports show that food prices increased by 13.4 per cent in September versus one year ago. This has an impact of 4.05 per cent points. At the same time, pork rose by 43.5 per cent and this affects the overall CPI at a level of 1.24 per cent points. Now with around a 15 per cent drop in pork prices since mid- September, the CPI is also decreasing. Currently, inflation is around 5.5 per cent for October, 2011. This is a drop from the high of 6.5 per cent in July, 6.2 per cent in August and 6.1 per cent in September. CPI for November was estimated to drop further to about 5.0 per cent. In reality, the measurement was 4.2 per cent. Food prices increased by 8.8 per cent in November compared with one year ago. Pork prices declined by 5.3 per cent from October 2011. "The pork I just bought cost 21 yuan ($3.30 US) a kilogram, a good deal less than the 30 yuan ($4.75 US) it cost about 4 months ago," said Yang Xia, a 62-year-old retired worker shopping in a Beijing supermarket.
  
  
• Ministry of Agriculture said recently that total meat production for 2011 is expected to increase 0.3 per cent to 79.5 million tonnes (lower than last year's 3.6 per cent rise). Pork is almost two-thirds of China's total meat consumption. China produced 54.53 million tonnes of meat in the first nine months of the year, up 0.2 per cent (year over year). Pork production in the January-September period fell 0.6 per cent to 35.68 million tonnes.
  
  
• Although China’s domestic supply of pork is showing growth, imports of pork are expected to rise by 8 per cent in 2012. This is mainly due to rising demand. An USDA report suggests that total meat production for China will be around 81.4 million tonnes (a 3 per cent rise year on year) for 2012. Pork output will reach 51.3 million tonnes, poultry will be around 18.7 million tonnes, beef will be around 5.70 million tonnes (note: beef consumption continues to decline) and sheep meat will be around 4.88 million tonnes for next year. Government incentives and/or subsidies to farmers contribute the most for this increase.
  
  
• For the first 9 months of this year, China imported 870,000 tons of pork and pork by-products—mainly offals. This represents an increase of 44.6 per cent from a year ago. Total imports for 2011 will slightly exceed 1 million tonnes (could be between 1.1 and 1.4 tonnes) which surpasses the previous high of 910,000 tons imported in 2008. In September, import volume set a new record of 0.14 million tonnes. For 2012, China’s deficiency between pork supply and demand could be between 2 and 2.5 million tonnes (Rabobank report). Of this total, demand will cause pork meat imports to increase by about 8 per cent to 480,000 tonnes next year (not including pork by-products but this is only pork meat).
  
  
• Sources fromChina’s Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) said that it had recently found Salmonella in some pig heads imported from Denmark. AQSIQ said it will destroy the contaminated pig heads. There have been a growing number of imports of unqualified pork variety meats during this time period.
  
  
• In January 2012, Aurora Cooperative projects that it will initiate a sale of 10,000 tonnes of pork from Brazil. Brazil usually exports about 50,000 tonnes/month and thus, the 10,000 tonnes along with a continuous demand by China, could be as much as 20 per cent of the total export potential from Brazil. China would be Brazil’s second largest importer of pork in the next year.
  
  
• China’s animal health industry is growing by an annual average of 25 per cent per year since 2005. In 2012, the industry will generate close to 40.2 billion RMB ($6.36 billion US). In the world, China is second to the USA for the production of animal health products. Growth will continue to rise as domestic livestock production increases and a national concern over the vaccination of such diseases as PRRS and Foot-and-Mouth, along with Swine and Avian influenza continues and mandatory vaccination is enforced.
  
  
• The Delisi Group has introduced their latest creation in the cured meat production unit of their modern chilled pork and processed meat section in Shandong province. They have introduced a cured ham product called 'Paluosi'. "We expect the launch of our new product to be a good start for us to enter into the premium meat market," said Chairman, Zheng Heping. The cured ham is created using modern equipment from Italy. The ham is initially priced at 500 RMB/kg ($79.10 US/kg). This price is close to 20 per cent less than a similar imported product. Delisi Group will target high end hotels and foreign-invested supermarkets and is currently testing in markets in Beijing, Qingdao and Jinan.
  
  
• According to the Ministry of Agriculture, scaled pig production (greater than 500+ finishers per year) now accounts for 34 per cent of the total output of pig production in China.