U.S. production is more than expected but China might import more pork
China is drastically reducing its sow herd, and the United States has drastically increased its hog production in recent months.
Those two factors will likely have a big impact on Canadian hog prices, said Alberta Pork chair Frank Novak.
Speaking May 28 at a hog producer meeting in Lethbridge, Novak acknowledged recent healthy prices that followed the drop in the market earlier this year.
However, he cautioned producers against relying on current profits in light of coming challenges.
“We had a whole pile of pigs show up in the United States, and the reasons for that are multiple,” said Novak.
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“One of them is that the big American producers who had huge devastating losses from PED (porcine epidemic diarrhea virus) over-bred like crazy because they ex-pected to have big losses again this winter.
“The really big losses didn’t happen, and so they had way more pigs than they expected to. That’s part of the increase of supply that we saw that helped push our market down here in the first quarter of 2015.”
However, greater supply in the U.S. isn’t a short-term situation, said Novak. American producers are building new barns, and the resulting additional pork supply will pressure Canadian prices going into next year. But China might change that forecast.
In China, disease pressure and the high feed costs have forced a reduction in the country’s 50 million sow industry. “China is liquidating sows at a furious pace,” said Novak.
“In fact, depending on whose numbers you believe, there could be up to 7.5 million sows that have already been killed.”
The latest Chinese sow inventory has the breeding herd at 40.4 million.
“We’re hoping that that might mean that they need to buy from North America, which will help pick up some of this extra supply that we’ve managed to produce on our own here in North America, especially in the United States.”
However, China’s plans are known only to China and the country has other sources of pork if it chooses to buy. It often has its own controlled food stocks, which it can draw upon while waiting for pricing opportunities.
“They don’t have to buy product. They could just let people go hungrier. It’s not like they haven’t done that before,” said Novak.
“So we don’t know how much they will buy. We don’t know how much they can afford to buy, and they can buy from people besides us.”
China tends to buy lower-end pork products but Chinese consumers may be persuaded to seek higher-value product as incomes rise there.
However, Novak said it takes time to build that market.
