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Genesus Global Market Report - China

by 5m Editor
24 May 2012, at 9:24am

CHINA - Looking at the size of the breakdown of the inventory for March 2012-breeding stock was around 49.54 million and total on farm inventory was around 461.67 million (as compared to February 2012-breeding stock was around 49.49 million and total on farm inventory was around 458.46 million), writes Ron Lane, Senior Consultant for Genesus China.

The 461.67 million head for March is up 4.04 per cent from last year while the March sow inventory is up 5.46 per cent from last year (year over year). Sow inventory has been quite flat January to March. The 2011 total farm inventory is up about 4.9 per cent or over 22.5 million head versus 2010. For 2012, total farm inventory is projected to increase by 5 to 6 per cent. In 2011, the average inventory for breeding stock was 49.29 million and total on farm inventory was 468 million.

Genesus Global Market Report
Prices for the week of May 13, 2012
Country Domestic price
(own currency)
US dollars
(Liveweight a lb)
USA (Iowa-Minnesota) 83.34¢ USD/lb carcass 60.93¢
Canada (Ontario) 1.47¢ CAD/kg carcass 53.30¢
Mexico (DF) 18.45 MXN/kg liveweight 60.07¢
Brazil (South Region) 2.02 BRL/kg liveweight 43.82¢
Russia 95 RUB/kg liveweight $1.37
China 14.02 RMB/kg liveweight $1.00
Spain 1.31 EUR/kg liveweight 75.27¢

Profit margins continue to show declining returns. Current profit margins for the end of March are at 187 RMB/market pig-$29.68 US; down as compared to late January at 600 RMB/market pig-$ 95.24 US and down from early March at 418 RMB/market pig-$66.35. Estimated profit margin for June 2011, was around 770 RMB/market pig -$119.10 US and was the peak price. From late January at 600 RMB/market pig-$ 95.24 US to the current 187 RMB/market pig- $ 29.68 US-more than 70 per cent decline during this time. Average profit for 2011 was estimated to be 500 RMB/market pig-$ 79.37 US.

Price May 8th, 2012 May 2011 % increase/decrease year-on-year
Pig price 13.76 RMB/kg ($2.18 US/kg) 15.21RMB/kg ($2.41 US/kg) -9.5%
Pork price 22.65 RMB/kg ($3.60 US/kg) 24.08 RMB/kg ($3.82 US/kg) -5.9%
Piglet price 34.27 RMB/kg ($5.44 US/kg) 30.32 RMB/kg ($4.81 US/kg) 13.0%
Sow price 1,740 RMB/head ($276.19 US/head) 1,659 RMB/head ($263.33 US/head 4.9%

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).

Pig prices, since January 19th, 2012 have fallen about .02 RMB/kg/day ($ .003US/kg/day) each day for about 72 days. This is about a 12.1 per cent drop in overall market price (1.45 RMB/kg- $ 0.23 US/kg) drop in 72 days.

8 May 2012 average carcass price from large scale slaughterhouses was 22.65 RMB/kg ($ 3.60 US/kg). Data from the large cities in China showed the average live hog purchase price to be 13.76 RMB/kg ($ 2.18 US/kg). The price difference between meat price and live purchase price is 8.89 RMB/kg ($ 1.41 US/kg). Live hog slaughtering profit decreased to 107 RMB/head ($ 16.98 US/head). This is down from last month and March. The slaughter profits are now lower than the market pig profits.

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

The USA could produce 117 million pigs this year (the most pigs in over 50 years) and China could also produce 690 million pigs this year. These increases could cause prices to drop by 10 per cent by the end of 2012. Global pork production is expected to exceed demand by 577,000 tonnes, the most since 1983, bringing reserves close to 815,000 tonnes at the end of this year. In China, 45 million sows will provide a steady production to balance the normal demand with supply. An increase to 47 million sows in 2011 saw the price rise even though it would normally drop. Analyst believe that with the sow number at 49.5 million, that the average price could drop by 10 per cent as compared to 2011.

Current 2nd quarter (1 April to 30 June 2012) is predicting a bottom in the price for this year with an average price hovering around 14 RMB/kg ($ 2.22US/kg). The 3rd quarter is showing a slight rise in the price. The 4th quarter shall see a dip in the price as the spring born seasonal pigs start to come to market.

In March, 2011, the pig and corn ratio was 7.07:1 and was 7.63:1 for May 2011. In September 2011 the ratio was 8.24:1 and in November 2011, a pig to corn ratio of 7.42:1 was shown. For January, 2012, a 7.79:1 ratio was calculated. Currently for early May 2012, the pig and corn ratio is 5.81:1. This is down from the previous month at 6.7:1 pig and corn ratio. A pig to corn ratio of 6:1 is considered to be break even.

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. Currently, inflation is around 3.4 per cent for April as compared to 3.6 per cent for March, 2012. This is a drop from the high of 6.5 per cent in July (37 month high). CPI for January was 4.5 per cent and was 3.2 per cent for February. Food prices increased by 7.0 per cent in April compared with one year ago. Pork, China’s staple meat source has been declining in price and thus the decline in pork and fruit prices is offsetting the rise in vegetable prices. Analysts expected that the years’ average CPI will decline to 3.3 per cent from 5.4 per cent in 2011.

The national average corn price for May 8th, 2012 was 2.37 RMB/kg ($0.376US/kg), the national average wheat bran price was 1.79 RMB/kg ($0.284US/kg) and the national average soybean meal price was 3.64 RMB/kg ( $.578US/kg).

A recent prediction by INTLFCStone Inc., a global commodity advisory group, predicted that China's corn imports could jump sevenfold to a record 28 million tonnes by 2015-2016. Local production is not likely to match rising demand. Furthermore, China's corn imports in 2011-2012 could rise to four million tonnes and reach 13 million tonnes by 2012-2013. Local corn production could reach 187 million tonnes in 2013. However, this level of corn production would be short by about 6.5 per cent of actual projected demand.

In late 2011, Brazil commenced shipping to China. In early 2012, China has received more pork from Brazil. Although the volume has been low, the Brazilians see China as a huge market for pork. Initially, only three plants have been certified so far by the Chinese authorities, but more plants are expected to meet the criteria for shipping to China. Russia for years was Brazil’s number one pork export market; however in 2011, Russia took only 24.5 per cent of total exports. Hong Kong moved into first position, with 25.12 per cent; Ukraine into third position at 11.95 per cent; followed by Argentina at 8.14 per cent.

During the first week of May, 2012, the Inspection Unit of the Ministry of Commerce (MOC) was going around to check violation charges within the food chain supply. Included in this is to check and “straighten out“ the large retailers who are in violation with their suppliers and to “perform pig slaughtering and qualification audits.“ The Inspection Teams listened to reports, visited sites, performed analysis on problems and identified weak links as part of the process. Some preliminary comments from the Team include:

  1. Need for a thorough examination of clean-up standards
  2. Increase supervision over law enforcement
  3. Deal with the “case“ as soon as possible
  4. To improve the long term remediation measures to ensure and to correct the suppliers non-compliance to the regulations and policies
  5. To correct large scale retail enterprises to maintain “market order and fair dealings to consumers leading to retail health“

There are 12,783 slaughtering companies to complete the inspection and audit.