The 461.21 million head for May is up 4.20 per cent from last year while the May sow inventory is up 5.90 per cent from last year (year over year). Sow inventory has been quite flat from January to May. (June 2012 results indicate that the breeding stock inventory is 49.3 million and total on farm inventory is around 457.8 million). The drop in on farm pig inventory from last month shows the effect that disease has had during the late fall and early winter on piglet numbers and thus on farm inventory. The 2011 total farm inventory was 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.

Profit margins continue to show declining returns. Current profit margins for the 3rd week of June were estimated to be 136 RMB/pig- $ 21.59 US/pig. At the end of March the profit margin was at 187 RMB/market pig-$29.68 US; down as compared to late January at 600 RMB/market pig-$ 95.24 US. 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 136 RMB/market pig- $ 21.59 US-more than 77 per cent decline during this time. Average profit for 2011 was estimated at 500 RMB/market pig-$ 79.37 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).

1 July 2012 average carcass price from large scale slaughterhouses was 19.28 RMB/kg ($ 3.06 US/kg). Data from the large cities in China showed the average live hog purchase price to be 14.17 RMB/kg ($ 2.25 US/kg). The price difference between meat price and live purchase price is 5.51 RMB/kg ($ .81 US/kg). Live hog slaughtering profit has decreased to 48 RMB/head ($ 7.62 US/head). This is down from previous recent months. 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% as compared to 2011.
  
  
• Current 2nd quarter (1 April to 30 June 2012) is predicting a bottom in the price for this year for slaughter pigs with an average price hovering around 14 RMB/kg ($ 2.22US/kg). Currently, the price as of 22 June was 13.77 RMB/kg ($ 2.19US/kg). This is on par with the predictions. June 2012 compared to June 2011 is down 28.5 per cent. . Certainly, with the higher summer temperature (which normally decreases pork consumption) and with the summer being the traditional off-season for pork consumption, the price of live pigs could continue to fall.
  
  
• Last year, most of the market pig price increase occurred around Spring Festival-late January, 2011. Piglet mortality from an epidemic diarrhea had reduced the numbers weaned and thus affected the number of pigs marketed. This year, there has been a recurrence of the diarrhea; however, this year, there has been a lower demand for pork and the imports of pork more than doubled. Thus the rebound in pork prices did not occur this year.
  
  
• In September, 2011 the pig to corn 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 late June 2012, the pig and corn ratio is 5.79:1. By 1 July, the pig to corn ratio was only 5.71: 1. This is down from the previous month at 5.87:1 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 3.0 per cent for May as compared to April at 3.4 per cent and March, 2012 at 3.6 per cent. This is a drop from the high of 6.5 per cent in July 2011 (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. Predictions for June could see a further drop in the CPI.
  
  
• The national average corn price for 19 June 2012 was 2.38 RMB/kg ($0.378US/kg), the national average wheat bran price was 1.783RMB/kg ($0.284US/kg) and the national average soybean meal price was 3.56 RMB/kg ($.565US/kg). When looking at year on year price, corn is up 5.78 per cent, wheat bran is up 8.54 per cent and soybean meal is up 21.09 per cent.
  
  
• For the first quarter of 2012, livestock and poultry meat production was 22.7 million tons-an increase of 2.9 per cent since the end of 2011. Pork production was 15.11 million tons (still 66.6 per cent of the total meat production-an increase of 4.0 per cent since the end of 2011). Live pigs numbered 455.57 million head on the farms- an increase of 3.9 per cent and the number of pigs slaughtered was 199.89 million- an increase of 3.6 per cent from the end of 2011.
  
  
• Recently, China`s investment in the pig industry food chain has been busy. According to some industry calculations, about 30 A-share listed companies are involved in pig farming or want to become involved. Various media reports have shown that five listed companies have shown their intentions to do large investments in the pig industry during the first 6 months of 2012. For example, Wuhan Iron and Steel, in March, announced plans to invest 39 billion RMB (about 6.2 billion US) into the pig industry. Whereas, Shanxi Coking and Coal Group have signed a formal cooperative agreement with the Shuanghui Group to build a large capacity pig slaughter plant in Taiyuan, the capital of Shanxi Province. COFCO has commenced the first domestic pigs trust funding and is trying to raise 15 million RMB during the next 12 months.
  
  
• During this year, the growth in animal vaccine use in China will grow by 28.1 per cent and will reach a market value of 9.56 billion RMB ($1.5 billion US). This compares to last year’s sales of 7.11 billion RMB ($1.1 billion US). Swine vaccines were one half of the total of all vaccines used (49.4 per cent) and poultry was 42.3 per cent. Currently, the Chinese government is actively looking at programs to prevent epidemics and further implement the compulsory use of immunisation protocols for all livestock. The PRRS and Foot and Mouth diseases, along with other diseases, are still problematic for China’s swine producers.
  
  
• In mid-June, Shenzhen Custom Officials seized a ship loaded with 60 containers of frozen beef, chicken wings and pork tripe from the USA, Brazil, Australia and New Zealand. Over 1,800 metric tonnes worth about 9.25 million RMB ($ 1.47 million US) was detained in port. These goods were a food safety concern because of poor transportation plus the meat was not inspected nor quarantined.