USDA updated estimates for pig in China

On the last 12th, USDA updated the estimates for the global meat industry, and attention is focused on the numbers of Chinese pig farming. China is the world’s largest producer, consumer, and importer of pork and can affect the dynamics of many markets around the world.

The USDA numbers point to a change of context compared to the last report released in 2022, considering upward adjustments in all of China’s main lines, both for 2022 and 2023. Another point is that the department adopted a conservative stance in its production estimate for 2023, which ends up impacting the number of imports, keeping the latter at a high level, as will be seen ahead.

USDA estimated the 2022 Chinese pork production at 55 mln tons, which is 4 mln tons higher than the forecast in October 2022. With this, production in 2022 reached the highest level since 2015, when it exceeded 56 mln tons. For 2023, USDA also projects 55 mln tons, without any increase, which seems unrealistic, considering that last week the Chinese government showed concern over the current production level and the expansion of the number of matrices.

Production is actually high, so much so that pork and live pig prices plummeted in China. The live pig futures contracts in Dalian show that market players are pessimistic about the coming few months. Since mid-October 2022, the March contract has dropped 29%, from 21,100 to 14,970 yuan per ton registered on the 19th. The May contract is close to 17,000 yuan per ton, with a possible increase in demand, but also signals fragility ahead. Another variable worth mentioning is that pig farmers’ margins are deteriorating in China, according to government reports, which tends to lead a portion of farmers to accelerate the sale of animals to avoid losses.

As for matrices, USDA estimates a herd of 42 mln head at the beginning of 2023. On the other hand, interlocutors of the Chinese government recently pointed out that the herd of matrices reached 44 mln head in December. For Chinese consumption, USDA estimates 56.99 mln tons in 2023, an increase of 0.06% compared to 56.95 mln tons in 2022. The easing of restrictive measures used to combat COVID-19 is a point that can help consumption this year, but the news related to the strong increase in deaths tends to psychologically affect individuals on a daily basis, which is worth monitoring.

Finally, with production and consumption estimates practically unchanged in 2022 and 2023, pork import numbers by China were high. For this year, USDA indicated 2.1 mln tons, against 2.05 mln tons in 2022. Given the difficult scenario for Chinese pig farming in terms of supply, prices, cost, and production, USDA must bring numbers a little more realistic in its next report, in April. That is, stronger production and weaker imports, which is worth attention here in Brazil, since the dependence on Chinese purchases has increased over the last few months. China will continue to import, but the ton price factor may weigh, and negotiations may soon get tougher, which is bad for the margins of the industries that serve this market and may affect the business environment for live pigs in the interior of Brazil.

It is worth mentioning that the Chinese government is already studying a new round of pork purchases in the domestic market, intending to adjust availability and promote a favorable environment for prices.

Tags: USDA, pork, prices, Meat, Production, forecast, markets, estimates, live pig, pig farming, China