CME: China Calling for Pig Herd Reduction

US - The results of Canada’s second round of hog farm buyouts were announced on Tuesday, according to Steve Meyer and Len Steiner in their Daily Livestock Report for 16 December.
calendar icon 17 December 2009
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The program is called the Hog Farm Transition Program (HFTP) and producers submit bids at which they would empty their barns for three years. The federal funded program then accepts the bids beginning with the lowest and proceeding until the funds for the round are depleted. This round involved Can$24 million.

It will remove 43,182 sows from the Canadian herd. The first tender, announced in early November removed 22,777 sows. The challenge remains figuring out how many of those sows have already gone to market since the program is retroactive to 1 April. Even the second tender could involve sows that have already been counted in U.S or Canadian sow slaughter. We have yet to see any official estimates that would help us put the liquidated sows in the correct time frame.

We believe that MANY of these sows were culled during the summer months since Canadian total culling (Canadian sow slaughter plus exports of Canadian cull sows and boars to the US) was 24 per cent higher than year-ago levels from June through September and has been 10% lower than year-ago levels since 1 October. Therefore, do not expect to see a marked increase in the number of sows moving to Canadian or US sow slaughter plants as a result of Tuesday’s announcement. The third round of HFTP tenders will announced on 20 January. This round will again involve Can$25 million.

It appears that China is now calling for a REDUCTION of its pig herd. China’s National Commission of Reform and Development has indicated that it expects pork and hog prices to rise through the Chinese New Year and then begin to decline due to “high inventories of breeding sows.” Chinese government officials are suggesting that pig producers get rid of low quality and extra sows.

USDA’s Foreign Agricultural Service (FAS) forecasts China’s 2009 pork production to be 48.5 million metric tons (that is 106.9 billion pounds — roughly 5 times the output of the US pork industry!), 5 per cent more than the level of 2008. FAS expects 2010 output to be 50.3 million metric tons, up 3.7 per cent from 2009.

Perhaps a more meaningful comparison, though, is to compare projected 2010 output to that of 2007, the year that widespread death losses among China’s pig herd cause production to fall sharply. The result: +17.3 per cent. And the 2010 forecast output level is 8.1 per cent higher than production in 2006, the last year of full production before the death losses. If FAS is correct, it appears that China’s producers have indeed responded quickly to the high prices of 2007 and 2008.

FAS projects 2009 per capita pork consumption in China to be 36.1 kg or 79.4 lbs. carcass weight. That breaks the old record of 35.1 kg set in 2006 before the death loss-induced production decline. FAS’s forcast for 2010 is 37.3 kg (82.1 lbs.) with imports down 20 per cent from 2009 levels. Bottom line: It appears China may not be as much of a US pork demand factor as some had hoped in 2010.

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