Looking at the size of the breakdown of the inventory for June, 2014, the information from MOA is indicating 428.18 million on farm inventory and a 45.94 million sow herd. The 428.18 million on farm inventory is up 0.2 per cent from last month and down 4.8 per cent from June, 2013.

The sow herd is down 1.0 per cent from last month and is down 8.2 per cent from one year ago (June, 2013). Again in June, another 464,000 sows plus another 470,000 sows in May along with the 1.05 million sows from April were eliminated during the past three months. The current sow inventory is the lowest level in four years.

It is expected that there will be more sows lost in July. (July, 2014 report has just been released- farm inventory (429.46 million is up 0.3 per cent from June and down 5.4 per cent from July, 2013.

The sow herd is down 1.2 per cent from last month (now at 45.39 million sows) and is down 9.1 per cent from one year ago (July, 2013). Another 550,000 sows went to market in July, 2014. The 9.1 per cent loss in sow numbers is about 4.1 million sows-maybe about two-thirds (2/3s) of the total number of sows in the USA-number two in the world for sow numbers.

Hog production capacity has significantly been adjusted with the main cause being the loss of farm households. Despite the recent recovery of the market price for live pigs, several farm households are still in financial difficulty.

MOA states that since the peak high of November 2013, the on farm inventory has dropped 8.1 per cent or about 35.5 million pigs… more than Canada’s total production for one year. Factors such as disease, cold weather and/or home consumption (mainly backyard farms) for Spring Festival, have all affected the total on farm inventory. Recently, the low prices have been sending sows to market as small farmers are lowering the sow herd size or are totally quitting the business.

The large sell off of sows for the past 11 months will cause a shortage of market pigs by the end of this year and thus a large increase in market pig and pork prices. This could have a large effect on the Consumer Price Index-something the national government does not like to see happen.

Releasing national government frozen pork stock reserves will only soften the price increase over a short period of time. Low market pig numbers means higher prices and higher CPI.

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. CPI increased to 102.30 Index Points in June (2.3 per cent) down by 0.2 per cent from May (102.50 index points in May and 101.80 Index Points in April).

For the first six months of 2014, the CPI has averaged 2.3 per cent. The price of pork in China fell 7.2 per cent, contributing to a decline in the April CPI. As the prices increased in May, the CPI increased by 0.7 per cent.

Currently, the pork prices are keeping the CPI lower, but a substantial increase, likely towards the end of this year, will cause national government concern. As a measure, when pig prices increase, CPI should increase.

Profit margins are still showing losses from last month (still substantial losses). Recently, the farrow to finish farm was losing 177 RMB/ market pig ($ 28.80 USD/market pig) for an average for the month of June On 28 May, the farrow to finish farm was losing 84 to 90 RMB/head ($13.67 to $14.64 USD/market pig) and on 11 April, a farrow to finish operation was losing 357 RMB/head ($ 58.09 US/ market pig).

Some analysts calculate that the loss for some newer, more financially leveraged farms is even higher. Compared to 15 January, it was reported that profits for a farrow to finish operation was 49.06 RMB/market pig ($ 7.98 USD/market pig).

• June Monthly Averages: market pig price was 12.80 RMB/kg ($ 2.08 USD/kg-$ 0.94 USD/lb.); pork price was 20.32 RMB/kg ($ 3.31 USD/kg-$ 1.50 USD/lb.) and piglet prices were 24.94 RMB/kg ($ 4.06 USD/kg-$1.84 USD/lb.).
• 15 August the market pig price ranged from a low of 14.4 RMB to a high of 15.8 RMB/kg ($ 2.34USD/kg to $ 2.57 USD/kg-$ 1.06USD/lb to $ 1.17USD/lb.)
• Last week, 15 August, the pig to grain ratio was 5.58:1(up 5.9 per cent from 18 July when the pig to grain ratio was 5.25:1). On 12 June, the pig to grain ratio was 5.09:1. On 28 May, the pig to grain ratio was 5.43:1, up 2.27 per cent from the week before. On 11 April, the pig to grain ratio was 4.4:1; on 20 February, the pig to grain ratio was 5.49:1; and on 15 January, 2014, the pig to grain ratio was 6.18:1. This fell from 6.52:1 from the week before (8 January). At the end of October, 2013 the pig to grain price ratio was 6.59:1. For most weeks this year, the pig to grain ratio has been below the traditional breakeven point of 6.00:1.
• The WH Group, the largest pork producer in the world, had removed their IPO plans from the Hong Kong stock market this past Spring. The Group, formerly known as Shuanghui and who bought Smithfield Foods last year, re-posted the IPO and was able to raise 2.05 billion USD, which is about 50 per cent less than what they had hoped to raise with the initial IPO in April. WH Group sold 2.57 billion shares at a fixed opening price of $ 0.79 USD (about 4.86 RMB/share). Shares were up 6.5 per cent on the first day of trading.
• For 11 consecutive months, the sow numbers declined to the July level of 45.4 million head (a four year low). With the decline in the number of sows, then the supply of piglets will be a tight balance for the second half of 2014 (416.25 million piglets-a 7 per cent decrease compared to second half of 2013. The full year expected piglet supply is 825.91 million head-down 3.5 per cent compared to the full year in 2013. The first half of 2015 is expected to continue to have a decline in piglet numbers.
• According to the provincial animal health monitoring and early warning center for the 480 pig farmers that are monitored, the center shows that the average loss for the first half of the year for a slaughter pig to be 139 RMB ( $22.61 USD/market pig). The cost to produce a piglet at birth (sow feed, labour, vaccines, etc.) is about 300 RMB/piglet ($ 48.81/piglet). Raising the piglet to about a weight of nine kilograms (about 20 pounds), will cost about 100 RMB more ($ 16.27USD/piglet). Total cost to nine kilograms (20 pounds) is about 400 RMB ($ 65.08 USD/piglet). However, the sale price is only 320 RMB ($ 52.07 USD/piglet) an 80 RMB ($ 13.02 USD) loss for the first six months of 2014.
• A recent survey from Guangdong province—near Hong Kong, indicates some current cost of production for the first half of 2014. The average cost to produce a grower to finish market pig for slaughter is 1,563.6 RMB ($ 254.40USD/market pig). Both feed costs and labour costs are up from last year. The average cost for feed is 919 RMB/market pig ($ 149.53 USD) and the price of labour is 119.5 RMB ($ 19.44 USD). Labour is up 16.9 RMB ($ 2.75 USD or 16.5 per cent from last year). The veterinary charges were 22.2 RMB ($3.61 USD) and the cost for the grower pig was 455.1 RMB ($ 74.05 USD) for the 18.3 Kgs.-40.3 lbs. pig. The average grower pig price is down 19.9 RMB ($ 3.24 USD) from last year. Average slaughter price was 1503.6RMB ($244.64 USD) with an average profit loss of 60 RMB ($ 9.76 USD) per market pig. Interesting note, when they break down the scale of farms and losses, the following trend was noted: large scale farms lost 103.6 RMB ($16.86 USD); medium scale farms lost 118.4 RMB ($ 19.26 USD) and small scale lost the least at 8.3 RMB ($ 1.35 USD). Large scale farms probably have some feed price advantage and small scale farms may not state actual labour charges.
• For 2014, the Ministry of Financial has provided 1.2 billion RMB ($195.2 million USD) to purchase breeding livestock and frozen semen directly to the farmers. Breeding pigs received 661 million RMB ($ 107.5 millionUSD).