China floods may boost prices, imports to world's biggest pork market

[BEIJING] Chinese pork prices, already close to a record, may find further support after thousands of animals drowned and transportation to slaughterhouses was disrupted by severe floods in southern China, analysts said on Friday.

High prices in the world's biggest pork market are a major concern for the Chinese government but a boon for exporters in Europe and North America. Some parts of China's southern and central provinces have received more than 500mm of rain since the start of July during a worse than usual summer flood season.

Prices, currently around US$2.69 per kg for live hogs, may hit US$3.29 by the third quarter, above the record of US$3.14 earlier this year, said Pan Chenjun, senior analyst at Rabobank.

Although it is not clear how many farms have been affected, industry website Soozhu.com reported high piglet mortality rates in some parts of Hubei and Anhui provinces, while the agriculture ministry said thousands of fattened hogs had died. China has about 37 million sows and a country-wide herd of about 380 million pigs.

Analysts said delays to slaughtering would only have a temporary impact on prices but the suspension of herd restocking would see current high prices persist for longer than forecast. "The impact on numbers is not that much but the impact on farmers' confidence is larger. If weather continues to be volatile they will stop replenishment," said Mr Pan.

Following major floods in 2010, areas worst hit by the disaster saw a 2 percent to 4 per cent drop in herd numbers, said Anxin Securities in a note on Friday. "We expect this serious disaster to extend the current cycle of high prices for longer," said the firm.

China consumes around 54 million tonnes of pork a year, almost all supplied domestically. While consumption is generally stable, its hog and sow inventories have fallen for more than two years, after farmers responded to weak prices by widespread culling.

Sow inventories hit a bottom in February but the rebuilding of herds has been slow, hit partly by disease outbreaks among piglets.

Supply had been expected to rebound by mid-2017 but if farmers choose to delay replenishing herds until the end of the summer, high prices may persist through much of 2017, added Pan.

That would benefit imports, said Mr Pan, likely to hit 2 million tonnes this year, up from 1.55 million last year. As much as 8 million tonnes a year of pork is traded globally.

REUTERS