Analysis Pigs
Chinese piglet price explodes after intervention
The Chinese piglet price has risen sharply in May. Remarkably, the Chinese piglet price is higher than the pork price. This indicates that Chinese pig farms expect pork prices to increase significantly.
Since mid-May, the Chinese piglet price has increased by about 50% compared to the beginning of the year. At the end of May, piglets were sold for 17.52 yuan per kilogram. At the current exchange rates, this translates to a price of €2.24. This seems to indicate that China is once again taking steps to make the Chinese pig farming industry profitable. In large parts of 2023 and 2024, oversupply resulted in Chinese pig farmers' income not covering costs.
The situation has changed due to government intervention. The Chinese Ministry of Agriculture has decided that the sow herd must decrease from 41 million to 39 million sows. Currently, China is about halfway to the goal with around 40 million sows.
Pork price lower
With the rise, the market anticipates a significant increase in slaughter prices. At the same time, Chinese pork prices are lower. Although pork prices were significantly higher at the end of May, the increase is much lower than the piglet price increase. Since March, the pork price has risen from 15.18 to 16.70 yuan (€1.94 to €2.13).
Pig farmers only purchase piglets at prices where they believe they can make a profit. Given the high prices paid for piglets, Chinese pig farmers estimate that prices will increase significantly. However, pork and pork prices are likely not to rise as sharply in relative terms. In a tighter market, piglet prices generally rise more strongly than slaughter and meat prices.
According to the Chinese Ministry of Agriculture, the discrepancy can be explained by a high slaughter rate. Currently, the supply of pork is high because many pigs are being slaughtered. The market's expectation is that significant pressure will be put on the supply of slaughter pigs in the third quarter.
Is the situation sustainable?
Now that the Chinese government is getting its way, the question is to what extent the state will also succeed in stabilizing the market. With higher prices, it is more attractive for Chinese pig farmers to sell more piglets. The question is whether the government can maintain control over supply with the current target.
