The 453 million head for May is up 3.6 million head from April (0.8 per cent) and up 19.1 million head (4.4 per cent) from May 2010.Sow inventory reached 47.1 million head in May, up 0.32 per cent from April and up 0.21 per cent compared to May 2010. Sow inventory had increased in September, but decreased through October and November, a marginal increase in December and then slightly lower in January through to March 2011.

Average live hog prices in June (the price reaching just over 18.60RMB/kg. liveweight- approx. $2.87 US/kg. liveweight) were up from May (the average price reaching 16.10 RMB/kg. liveweight (approx. $2.49 US/kg. liveweight). The average monthly live hog price in northeast China was higher than in south China. June’s price reflects a year on year increase of about 85 per cent. In late June, the national average live hog purchasing price reached 19.6 RMB/kg. liveweight- approx. $ 3.03 US/kg. liveweight) with some provinces exceeding 20.0 RMB/kg. liveweight- approx. $ 3.09/kg. liveweight).

Live hog prices seem to keep steady (18 July national price was 19.14 RMB/kg. liveweight-approx. $ 2.96 US/kg. liveweight). Present replenishment is very positive, especially for piglets. July and August live hog inventory is predicted to show continuous increase and this inventory increase will likely mean lower prices than the highs of late June 2011.

Profit margins continue to show strength. During the spring 2010, there were losses for most large-scale farms. With increasing market price, the profit margins have gained significantly (100 RMB/market pig for July 2010-$14.90 US; 140 RMB/market pig for September 2010-$20.90 US; 260 RMB/market pig for November 2010-$39.03 US and 325 RMB/market pig for March 2011-$50.00 US. June again shows an increase in profit margins to 770 RMB/market pig -$119.10 US. This was a substantial increase from May when the profit margins were closer to 510 RMB/market pig- $78.82 US. (Not too long ago, in Canada, we were only making $ 119.10 US gross, let alone any profit of that same amount!!!!).

The June average profits for those who purchased piglets from the market gained 665.0 RMB/head-$ 102.78 US, up 245.0 RMB/head-$ 37.87 US from May. The national piglet prices averaged 36.80 RMB/kg-$ 5.69 US/kg in June, up 5.90 RMB/kg.-$ .91 US/kg from May (more than 19 per cent increase in one month).

Short term scenario

Farmers have high expectations that the market price will be steady or will slightly increase through the mid-summer (throughout 2010, the inventory of live hog and fertile sows declined and now overall supply is tight-disease played a major role in 2010 as “summer fever” caused death, reduced fertility and caused lower piglet survivability). Following the concentrated slaughtering before Spring Festival, February and March are the traditional inventory peak periods, but that peak has been delayed. Millions of small farmers have actively restocked and thus piglet demand and price has increased substantially. Current piglets’ pricing indicates that there are fewer piglets for restocking. Tracking prices for replacement piglets shows: 23.8/kg-$ 3.62 US/kg in February; 25.2 RMB/kg-$ 3.88 US in March; 30.9 RMB/kg-$ 4.78 US/kg in May and 36.80 RMB/kg-$ 5.69 US/kg in June, up almost 100 per cent since the beginning of 2011. Right now the farmers are continuing to source scarce piglets.

What to watch for over the next few months!

• The pig and grain (corn) ratio in December was at the profitable level of 6.7:1. In February, the pig and corn ratio was 7.12:1 and was 7.07:1 for March and was 7.63:1 for May. Currently, the ratio is 8.40:1. With continued Government incentives and "huge profit margins", pig expansion in China will continue.
  
  
• Since the beginning of 2011, live hog price has been increasing continuously and reached a high of 20.0 RMB/kg ($ 3.09 US/kg) in late June, which is the same as the peak price in 2008, up over 40 per cent from early 2011 and up nearly 90 per cent year on year. Current live hog price increase has resulted from a very limited supply of market pigs. The main reasons for the shortage can be related to:
  
  
  1. Live hog price had been falling in 2008, 2009 and showed the lowest level in the first half of 2010. Farmers were worried for the continuous price decline in the first half of 2011, so that the replenishment was not positive even though farming profit began to increase in the second half of 2010.
     
     
  2. Diseases, especially PRRS and diarrhea in early 2010, resulted in low piglet survival rate, live hog inventory decline and thus market hog supply decreased for the first half of 2011.
     
     
  3. In the past three years, hog diseases came up frequently; sow reproductive performance and piglet survival rate both decreased and thus eventually live hog inventory declined drastically.
     
     
  4. Along with frequent diseases, costs of production factors, such as feed and labour, have been rising at a fast rate. Many small scale farmers were facing the influence of the diseases and now the market risk. On the other hand, urbanization development with other job opportunities and with a higher payment also led to a large number of small farmers exiting market.
  
  
  
• The Consumer Price Index (CPI) is becoming quite interesting to the National Government. Rapidly increasing pork prices has gained the attention of the National Government. Currently, inflation is hovering around 6 per cent. The CPI is made up of about 30 per cent food found in the consumers’ basket. Pork is estimated to be about 1/3 of the food portion of the basket or in other words, about 10 per cent of CPI as a whole. If this is the case, then with about a 90 per cent increase in the price of pork, year on year, then the price of pork would have a substantial effect on the CPIs rise. Watch the action of the National Government on pork prices, supply, imports and incentives to large scale producers.
  
  
• According to sources from the Ministry of Commerce (in charge of slaughterhouses), larger scale farms slaughtered about 17,502,000 head in May. This is an increase of 0.4 per cent from April, but down 9.4 per cent year on year. From January to the end of May, the large scale group have slaughtered nearly 90 million total market pigs. This is down about 3.7 million heads or 4.0 per cent year on year. With increased demand for pork by middle and high income consumers and a tight supply of pork, this has contributed to a rapid increase in pork prices.
  
  
• In May, China’s total imported fresh and frozen pork was 19,800 MT. This is a rise of 37.9 per cent from last month and up 0.8 per cent year on year. Pork average CIF price was $1,490 USD/MT a rise of $140 USD/MT from last month and with a rise of $ 590 USD/MT from last year. From January to May 2011, China has imported a total of 99,800 MT of pork. This is up 40.0 per cent from May 2010. Importing countries are: US- 48,498 MT (about 49 per cent of the total); Canada- 14,228 MT (about 14 per cent); Denmark- 17,296 MT (about 17 per cent); Spain- 9,055 MT (about 9 per cent) and France- 6,827 MT (about 7 per cent of the total). Will this trend continue or will Brazil become a major exporter into China? In early April, China authorized three Brazilian pork producers for the first time to export pork into China. The Brazilian export association (Abipecs) considers the Chinese market could take about 200,000 tonnes/year. First shipments could occur in the fourth quarter of this year.
  
  
• It is estimated that the average Chinese citizen will consume 39.3 kilograms (86.6 pounds of pork this year). This compares to the 19.7 kilograms (43.4 pounds) in 1990 (USDA data). The Chinese like pork—would it not be grand, if we could achieve the same consumption results in North America???