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Dead Hogs in River No Obstacle as China Pork Prices to Climb

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Dead Hogs in River No Obstacle as China Pork Prices to Climb
A customer requests for a cut of pork at a market in Shanghai, China. Photographer: Tomohiro Ohsumi/Bloomberg

May 21 (Bloomberg) -- A three-month slump in hog prices in China, the world’s biggest consumer of pork, is poised to end as the government stockpiles frozen meat and shoppers look past a safety scare, the country’s top pig processor said.

The wholesale price of live hogs may gain as much as 13 percent to 15 yuan ($2.44) per kilogram by the end of 2013, Zhang Taixi, president of Henan Shuanghui Investment & Development Co., said in interview in Luohe, central Henan province, on May 18. Prices rose 0.2 percent to 13.29 yuan per kilogram in the week ended May 12, the Ministry of Commerce said.

Prices of wholesale pork plunged 17 percent from Feb. 15 to May 10, with the decline accelerating on the discovery of more than 9,000 dead pigs floating in Shanghai’s Huangpu river in March. This cut profits at pork producers and reduced demand for soybean-laden animal feed. The U.S. Department of Agriculture on May 10 lowered projections for China’s soybeans imports for two straight months to 59 million metric tons in the year through Sept. 30.

“Chinese traditionally consume more pork in the second half, so that will help draw down live hog inventory,” said Zhang, whose company makes more than 100 million sausages a day. “Stockpiling efforts by the government to stop the decline in prices may also help, at least psychologically.”

China has begun its second round of pork stockpiling this year to stabilize prices, the commerce ministry said May 17, without revealing the amount of purchases.

Pork Stockpiles

“Pork consumption should rise in the second half, helping boost soybean meal consumption,” Tommy Xiao, an analyst at Shanghai JC Intelligence Co., said by phone from Shanghai yesterday. “That should boost imports of U.S. pork and soybeans.” The U.S. is the largest exporter of both.

Hog futures for delivery in July on the Chicago Board of Traded were little changed at 91.550 cents per pound at 10:22 a.m. in Beijing and the most-active contract has gained 6.8 percent this year. Soybeans climbed 0.2 percent to $14.675 a bushel and have advanced 4.1 percent this year.

Increased food-safety awareness after the Shanghai river incident drove more consumers to buy from larger suppliers, which they see as more reliable, Zhang said. The crackdown on illegal slaughtering also accelerated the exit of smaller businesses, he said.

Increased consumption and acquisitions of small abattoirs will help the company achieve its target of boosting volume of processed hogs to 17.5 million heads this year, 50 percent more than last year, and boosting sales by 30 percent to 53 billion yuan, Zhang said.

Shares Climb

Shares in Shenzhen-listed Shuanghui rose as much as 1.7 percent to 39.68 yuan, and traded 39.35 yuan at 11:18 a.m. Beijing time. The shares have surged 36 percent this year.

Concerns about the spread of the H7N9 bird flu prompted consumers to switch to eating pork, Zhang of Shuanghui said. China’s poultry industry has lost more than 40 billion yuan from bird flu since the end of March, the official Xinhua News Agency reported May 19, citing China’s national livestock vet office.

Urban disposable incomes in China tripled in the last 10 years, boosting the consumption of meat, and the government seeks to double per capita income across the country by 2020.

There were 447 million hogs in China’s farms in April, more than six times the number in the U.S. at the end of March, agriculture department data from both countries showed.

To contact the reporter on this story: William Bi in Beijing at wbi@bloomberg.net

To contact the editor responsible for this story: Brett Miller at bmiller30@bloomberg.net

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