Pork production in China and its international impact

Pork production in China has recovered rapidly and the sharp drop in prices in the first half of 2021 is evidence of this. The rapid growth in production is the result of a major restructuring of China's pork sector, improved performance, and financial support from the government to limit inflation and price volatility. Small pig farms had restocked their barns to take advantage of the very high prices. Today, falling producer prices and rising commodity prices are greatly affecting farm profitability. Small farms have once again had to reduce their inventories, resulting in a one-off increase in domestic supply. On the other hand, large hog companies are receiving subsidies to continue production. The USDA estimates that China's pork production will reach 48 million tons in 2021 (+32% over 2020). In addition, imports have fallen sharply since the summer of 2021, down 10% compared to the previous year. The descapitalization of farms is expected to continue due to the economic losses suffered. Production is also expected to fall by 13% in 22/21. Despite the decline in pork consumption in China, imports could once again exceed 5 million t. But with the government's desire to stabilize prices, the value of imports is unlikely to reach the records of 2019 and 2020.

What is the impact of Chinese demand on international trade?

Given that Chinese demand is not recovering, suppliers will have to find other export opportunities and a greater volume will remain in the intra-EU market.

In July, the drop in Chinese purchases was accentuated. Imports fell by 35% between June and July. This drop in purchases is explained by an increase in domestic supply in the market due to the government's attempt to limit inflation. One of the signs of the increase in domestic supply is the fall in pork imports. Since March, China has significantly reduced its purchases of pork, especially carcasses, boneless parts, and ribs. On the other hand, imports of loins, bacon, and fats remain higher than in 2020 along with a stable demand for offal. The decline in Chinese demand is causing a redirection of flows towards the intra-European market, while German supply is already present in this market. In addition to the pressure on the international market to lower pork prices, China wants to diversify its supply in terms of suppliers and protein sources, which explains why in the United States about 17 pork, poultry, and beef slaughterhouses have recently obtained approval to export to China.