Chicago nearby lean hog futures are 30 percent higher than at the same time last year.
The reasons are several, including a small herd and the tight supply of pork and competing beef.
Strong exports are also a driver. Pork exports from the United States to the end of August, which is the latest number available, were running 18 percent ahead of last year by weight.
Booming exports to China and Hong Kong, up 80 percent, are a big part of the picture.
Canada’s pork industry is also doing well exporting to China, with tonnage doubling so far this year. The success will likely continue into 2012.
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A report by the U.S. Department of Agriculture attaché in Beijing forecasts that China’s pork imports in 2012 are expected to increase to 480,000 tonnes, up eight percent from 2011 and up 16 percent from 2010. Pork offal imports in 2012 are expected to increase 10 percent to more than 700,000 tonnes.
Chinese domestic pork prices soared this year with the average price in July up 68 percent over July last year.
Domestic production ran into difficulties in the past year. A period of weak hog prices in the first half of 2010 caused a number of producers to get out of the business.
That was followed by unusually severe and persistent outbreaks of animal disease, such as foot-and-mouth disease, swine blue ear disease (PRRS) and pig epidemic diarrhea among piglets in late 2010 and early 2011, the attaché said.
Supply was down as demand steadily increased, leading to higher prices and a demand for imported pork.
Better hog prices today and an attractive new subsidy ($15.50 per sow) from the Beijing government are expected to cause a four percent, or 1.97 million tonne, jump in pork production next year to 51.28 million tonnes.
By way of comparison, that increase is about equal to all of Canada’s pork production.
However, rising pork demand will outpace the production increase, leading to the need for increased imports.
China will also need to import more feed grain and oilseeds to feed its growing pork industry, which is undergoing structural change.
There is a big shift away from operations with three or four sows that were fed food waste. Instead, more pigs are being produced at big commercial operations that feed grain and oilseed meal rations.
This helps to explain why groups such as the U.S. Grain Council are certain that China is about to become a major corn importer.
It seems China’s growing demand for pork is sweet, not sour, for North American hog producers and grain farmers.
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