Pig herds plummet in Europe while China plans measures to stabilize pork prices

27 Jun 2022 --- Pork prices are picking up across markets as inflation starts to bite. Countries across Europe have seen a reduction of pig farms, which, combined with production cost increases, is ramping up the momentum of porcine meat prices.

Meanwhile, China - the world’s leading consumer of pork, is moving to introduce measures to “avoid drastic fluctuation in the market and ensure stable supplies”, according to the official state press agency of China, Xinhua. However, it’s not yet clear what these plans may be. 

The latest EU Commission data shows a 3% decline in the year’s first two months compared to 2021’s pig meat production. With substantial drops in pig meat production in Germany (-11%), Poland (-8%), Belgium (-8%) and Italy (-7%).

Spain is the outlier, as year-on-year production has spiked by 6% in the country.

Based on an average of monthly prices between 2019 and 2021, pork prices are significantly up. The EU average prices are 93.17% higher than the baseline, Canada’s prices are up 56.7% and the US prices have reached 149.17% higher levels, according to the EC June world pig prices update.

Globally, the FAO Meat Price Index set a new all-time high in May, 22% higher than the 2014-2016 baseline reference.

Germany never had a lower livestock number of pigs since the country reunification.China trying to tame pork market
The Asian giant is the world's largest meat consumer, with pork consumption reaching 40.3 million metric tons in 2020, according to the US Department of Agriculture (USDA). 

The Chinese government is doubling its efforts to control the prices of meat commodity. Releasing new guidelines on advancing sustainable and healthy development in the hog industry. 

The authorities warn that “China will see cyclical market fluctuations” in the pork prices and might currently be on a rising trend. 

Production saw a decrease last year due to the African swine fever, which dealt a heavy blow to some producers. The Chairman of New Hope Investment Group, Liu Chang, a major player in the sector, sent an apology letter to investors after the company reported its first estimated loss in years, saying that it was a severe “test on the entire industry.”

“After the African swine fever dealt a heavy blow to hog production and pork prices, authorities have taken a slew of measures, including handing out subsidies to encourage scale farming, to stabilize prices of the staple meat in China,” according to Xinhua. 

Pork prices are an inflation staple in China; so far, the country has tamed inflation, maintaining a 2.1% rate. However, rising food costs could bring this number up.

The official state press agency of China Xinhua put the latest June prices of pigs at US3.23$ per kilo, up 14.8% in one month. 

While cyclical fluctuations of pork supply and prices are a worldwide phenomenon, such volatilities are especially high in China, partly because most of the country’s pigs are produced on family farms.

Surging prices also come as China is reopening from restrictive COVID-19 lockdowns.

Germany declining livestocksThe FAO Meat Price Index set a new all-time high in May .
Germany never had such a low livestock number of pigs, according to the Federal Statistical Office of Germany (DESTATIS). 

The number of pig farms in the country is down 41% in the last ten years.

“Despite the recent significant increase in prices for slaughter pigs, the economic situation of many farms remains difficult, among other things, due to increased energy, fertilizer and feed costs and the associated higher production costs,” explains DESTATIS.

UK farmers demand higher prices
The National Pig Association (NPA) of the UK says that even with the record high pork prices, further price increases are needed to ease farmers’ finances.

Farmers warn that the product costs remain at record levels.

“Despite a recent slight easing of the wheat price, which is now around the £300 per ton (US$369) mark, there is no immediate prospect of this coming down significantly any time soon.” 

As cereal prices continue to establish new highs due to the Ukraine War. 

“The NPA is urging the supply chain to continue to take steps to increase the pig price to avoid further industry contraction and a long-term shortage of British pigmeat,” according to the association. 

By Marc Cervera