China makes progress rebuilding hog herd

Country says sow numbers will return to pre-African swine fever levels by the end of the year but observers are skeptical


China claims to be making huge strides in rebuilding its hog inventory but one North American analyst is skeptical of the government’s numbers.

China’s National Bureau of Statistics reports that the country’s hog inventory reached 340 million head at the end of June, up from 310 million at the beginning of the year, according to Dim Sums, a web blog on China’s rural economy.

The key number contained within that larger number is the country’s sow inventory, which reached 36.3 million at the end of June, according to the bureau.

That is way up from the low of around 25 million head when the agriculture ministry stopped reporting the number on a monthly basis in October 2019, in the midst of the African swine fever outbreak.

“The ministry’s objective is to boost sow numbers to 43.9 million by the end of 2020,” stated the Dim Sums story.

That would be the same level as the beginning of 2018, before the ASF crisis erupted.

Arlan Suderman, chief commodities economist with StoneX Group, said there is no doubt China is making good progress rebuilding its hog herd.

But he is skeptical that the sow inventory will reach pre-ASF levels by the end of this year and it won’t be the same quality of sow herd that previously existed.

His contacts in China tell him that the herd is being rebuilt with gilts that have substandard genetics, which will lower hog production by 30 to 40 percent.

Suderman’s intel leads him to believe that hog production is still down 20 to 30 percent from pre-ASF levels across the country.

“They are making progress but the disease is still rampant,” he said.

However, according to Dim Sums, Chinese pork production was down only six percent for the quarter ending June 30, 2020, versus a year ago, compared to 29 percent for the first quarter of the year.

“The ministry says 6,177 new large-scale swine farms were built in the first half of the year (and) 10,788 farms that killed off all their pigs last year have now restocked,” stated the blog.

The blog author acknowledged that local government officials have been given statistical targets they are expected to meet, which tends to result in “bloated” statistics.

Suderman said the Chinese government has massive incentives in place for the expansion of commercial hog operations but agreed that some of the production numbers seem inflated.

He noted that Chinese hog production margins are around US$370 per pig right now, which is akin to “hitting the lottery” in China.

He sees that as evidence that the hog industry hasn’t rebounded as rapidly as government officials are indicating.

“Piglet prices are setting new record highs this week, which would seem to indicate there is a shortage of pigs,” said Suderman.

Dim Sums said one reason behind the rising piglet, pork and live hog prices is the lifting of COVID-19 restrictions. That has led to increased pork consumption at restaurants, schools and workplace cafeterias.

Suderman said regardless of what the true numbers are, there is no denying that China’s hog herd is on the rise as evidenced by the country’s strong corn and soybean imports.

China imported 11.16 million tonnes of soybeans in June 2020, up from 6.51 million tonnes the previous June.

“Soymeal demand is much stronger than we anticipated,” he said.

That is also partly due to a larger-than-expected expansion of the country’s poultry flock and higher soybean meal inclusion rates in swine diets as the country shifts from backyard farms to more commercial operations, said Suderman.

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