Market analysis

China's live hog market was characterised by the following in the past week: The Chinese Dragon Boat Festival in end-May, celebrated by the consumption of Chinese dumplings, lent support to domestic hog prices.

There were few live hog deliveries from northern to southern regions due to high temperatures and transport costs. Pre-festive pork demand in the south was better than that in the north, as more people eat Chinese dumplings in southern China. Hog deliveries between Guangdong, Guangxi and Hunan provinces have picked up. Despite active procurement activities by hog traders in those regions, local hog prices only rose marginally.

Due to the presence of clenbuterol found in hogs delivered into Guangdong recently, cross-province deliveries into Guangdong were hindered. Coupled with a further rise in oil prices, profits of domestic hog traders were reduced after accounting for higher transport costs. Current live hog inventories in China have fallen significantly compared with the same period last year. The output of domestic slaughterhouses also continues to fall.

Pork prices in China were stable to lower after the Chinese Dragon Boat Festival amid reduced demand. Although hog prices were marginally higher in southern regions during the past week, local hog farmers only made meagre profits, and some still incurred losses.

Market forecast

Due to reduced domestic pork demand and high transport costs of hog deliveries, the build up in China's hog inventories generally remained significant although inventory levels are on a gradual decline. Live hog prices in China are expected to be generally range-bound in June, and may remain firm in southern regions.