Non-plague and export restrictions hit the German pig industry hard, and the stock hit a 30-year low
Germany has been the EU's largest pork producer for many years, a major global pork exporter, and a major source of pork imports on the mainland. In 2018, Germany was the continent's largest source of pork imports, with imports reaching 228,000 tonnes, followed by Spain with 220,000 tonnes. In 2019 and 2020, the amount of pork imported from Germany by the mainland reached 323,000 tons and 462,000 tons respectively. However, in 2021, the mainland's pork imports from Germany were almost zero, while the amount of pork imported from Spain exceeded the million-ton mark for the first time, reaching 1.099 million tons, accounting for more than 30%.
The change comes from African swine fever. In September 2020, the first outbreak of African swine fever appeared in Germany, and over the next year, the epidemic gradually spread from eastern Germany to the main producing areas in the west.
After the first non-epidemic case in Germany, the mainland quickly stopped German pork imports, and until now, the mainland has not resumed German pork imports. After losing China, a big customer, Japan and South Korea have also stopped German pork imports, which is undoubtedly "worse" for the German pig industry.
According to the German Federal Statistical Office (Destatis), the number of live pigs in Germany as of May 3, 2022 was 22.3 million, about 6.2% less than in November last year and the lowest record since German reunification in 1990 (30.8 million). At the same time, the number of pig farms in Germany decreased by 9.6% year-on-year, and about 1,900 pig farms ceased production.
European pig industry profitability faces challenges A large number of sows are cleared
InterPIG: Production costs and sales prices in different countries in 2021. (USD/kg live weight)
Rising costs are a common challenge facing the global aquaculture industry.
The profitability of the European pig industry is facing challenges or has already led to the liquidation of large numbers of sows. According to Jia Yu's calculations, based on 120 kg of live weight, in 2021, the average loss of the Dutch pig industry head was 38.4 US dollars, the average loss of German head was 34.2 US dollars, Austria, Belgium, Czech Republic, Finland, France, the United Kingdom, Ireland, Italy and Sweden were all losses of 14.4 US dollars, the average profit of Spain head was 3.6 US dollars, and the average profit of Denmark head was 3.6 US dollars.
Danish data shows that the number of Danish sows fell by 8% year-on-year in July this year.
UK sow numbers fell below 261,000 in June, down 18% year-on-year and a 20-year low, UK data showed.
Geneross expects the EU sow population to be reduced by up to 1 million due to losses in the industry, and pork production will continue to decline in the coming months.
Data show that EU pork prices reached 2025.1 euros/ton in October 2022, up 55.1% year-on-year, which has been higher than the same period last year for 11 consecutive months.
U.S. Hog Stock, Source: USDA
U.S. hog inventory declined
In the past two years, due to the impact of the new crown epidemic and pig diseases in some regions, coupled with high breeding costs and uncertainties in the profitability of producers, the US pig inventory has shown a significant downward trend. In 2021, U.S. pork production fell by 2.2%. In the first half of 2022, U.S. pork production continued to decline by 3% year-on-year, and hog prices rose 2.5% year-on-year to $1.62 per kilogram. Export demand has also been dampened by high prices. According to the US Department of Agriculture, in the first half of this year, US pork and by-product exports fell by 22.1% year-on-year, of which exports to China decreased by 55.5%.
According to the US Department of Agriculture, as of September this year, the US hog inventory was 73.8 million tons, down 1% year-on-year, but slightly recovered from June. Among them, the sow inventory was 6.15 million, down 1% year-on-year, and still slightly lower than June. The USDA expects pork production to remain down 2% year-over-year in Q4, while live prices for 51-52% lean hogs will rise 14% year-over-year.
The mainland's pork imports in October fell by more than 20% year-on-year, and imports fell by nearly 60% in the previous October
According to the latest data from the General Administration of Customs, in October this year, mainland meat imports reached 630,000 tons, down 5.4% year-on-year, and meat imports from January to October totaled 6.03 million tons, down 2.8% year-on-year. In October, pork imports were 160,000 tons, down 20.6% year-on-year and up 4.1% month-on-month, and pork imports from January to October totaled 1.38 million tons, down 58.8% year-on-year.
From the perspective of monthly import trends, the monthly import volume of mainland pork this year showed a trend of first falling and then rising, but the fluctuation range was not large. So far, the lowest monthly import volume is 122,600 tons in July, and the monthly import volume exceeds 150,000 tons only in January, September and October this year.
Domestic pig prices began to rise from the low level in April, but did not break through the breeding profit and loss line until the end of June, and the pig price in July further soared to more than 20 yuan / kg, import demand began to be stimulated, from the perspective of time, pork imports in August began to pick up month-on-month, but by October, the import increase was still not obvious.
In the first 10 months of this year, mainland pork imports were 1.38 million tons, and it is expected that imports in November and December will continue to pick up month-on-month, and it is expected that the annual import volume will be about 1.8 million tons, and it is difficult to break through the 2 million tons mark. In 2020 and 2021, mainland pork imports reached 4.39 million tons and 3.71 million tons respectively, and this year's imports were less than half of the average of the previous two years.
Pork imports may remain relatively low next year The impact of imports is limited
In September and October this year, affected by factors such as peak season demand growth expectations, selling at the breeding end, and secondary fattening, domestic pig prices rose sharply, but under the guidance of a series of regulatory measures by the National Development and Reform Commission and other departments, the enthusiasm of breeding end slaughter increased, domestic supply increased, and pig prices gradually fell back to the normal range. At present, the spot price of pigs has fallen back to below 24 yuan / kg, and from the situation of pig futures, the contract price after LH2301 has fallen back to below 20000 yuan / ton, of which LH2305 has fallen back to 18000 yuan / ton, LH2307, LH2309 has fallen back to around 17000 yuan / ton. The trend of futures shows that the market is not particularly optimistic about the trend of pig prices next year, and the continuation of the new crown epidemic will inhibit the enthusiasm of importers to import.
From the perspective of the global market, the shrinking output of the pig industry in many countries, the shrinkage of global pork trade, coupled with rising costs, the price advantage of imported pork has narrowed, which will also inhibit the import volume of mainland pork in the later period. The high import situation in 2020-2021 may be difficult to reproduce in the short term. The mainland's pig production capacity has returned to a reasonable range, and the decline in import demand will also affect the global pork trade pattern, and the impact on some markets that rely on Chinese demand cannot be underestimated.