Since 2021, the price of pigs and pork has fallen by more than half compared with the beginning of the year, the fundamental reason is the rapid recovery of pig production capacity, coupled with the rise in the pressure bar, the pig out of the barn has increased significantly, the market pork supply is sufficient, and the consumption in the first three quarters is weak, which cannot provide effective support for pig and pork prices, and the market continues to oversupply. In this case, the domestic pork import volume is also due to the decline in import profit compression, so how the current status of pork imports, how will the future market develop, this article will provide a preliminary analysis for your reference.
First, the basic situation of domestic imported pork
According to customs data, from 2012 to 2015, the number of imported pork was within 800,000 tons, which doubled sharply to 1.6 million tons in 2016, maintained a level of 1.2 million tons/year in 2017-2018, increased sharply to nearly 2 million tons in 2019, and continued to double to 4.3 million tons in 2020. The total import volume as of September 2021 reached 3.02 million tons, accounting for 70.23% of the whole year of 2020 (Chart 1), according to the current dependence on domestic pork imports, the import volume of the whole year of 2021 is expected to be lower than that of 2020.
(1) What are the main source countries of imported pork?
From the analysis of import data in 2020, the top five main source countries of imported pork (excluding pork offal) in China are Spain, the United States, Brazil, Germany, and Canada (Figure 2).
From a regional point of view, pork imports mainly come from the Three Regions of the European Union (included in the United Kingdom), North America and South America, of which the largest import volume to the European Union. According to the 2020 sub-regional pork imports chart, EU imports reached 56.36%, North America reached 28.17%, and South America reached 15.46% (Chart 3).
(2) Which varieties and types of imports
According to the customs statistics in 2021, China's imported frozen meat is mainly based on three major categories: first, 0203 products are a full range, including bone-bearing front legs, hind legs and their meat pieces, frozen whole head and half head of suckling pork; second, 0206 items in the subheadings of 41, 49, 90 and other subheads of frozen pork offal; third, 0210 items in the 19 suborders of other dry, smoked, salted or salted pork.
According to the 2020 pork import data, the total import of frozen pork under the 0203 subheadings 21, 22 and 29 was 4.2978 million tons, accounting for 99.89%, while the total import of fresh or cold pork under the 12th and 19th subheadings was only 0.49 million tons, accounting for only 0.11%. Therefore, imported pork is mainly frozen meat, and fresh and cold pork account for a small proportion.
Second, the trade process of imported pork
(1) Import and distribution process of imported meat
Domestic pork imports from foreign meat production enterprises, according to direct and indirect relations, there are four ways of trade circulation:
1. Domestic traders import pork from foreign meat enterprises through foreign traders and distribute them to domestic factories or domestic distributors;
2. Domestic factories and domestic distributors directly import pork from foreign meat manufacturers through foreign traders;
3. Domestic traders import pork directly from foreign factories and then distribute it to domestic distributors and factories;
4. Domestic distributors and factories import pork directly from foreign meat enterprises.
After obtaining imported pork, domestic distributors sell it to large catering enterprises or to small and medium-sized catering enterprises or retail stores through next-level wholesalers (Chart 4). Domestic factories obtain imported meat, process finished or semi-finished products, and sell it to large catering, next-level wholesalers or agents for further distribution. Due to the consumption habits of domestic residents based on hot and fresh meat, 80 to 90% of imported frozen meat enters processing plants or catering enterprises, and rarely directly flows into resident consumption channels.
(2) How imported pork is priced
Imported pork arrival price = pork CIF price * exchange rate * tariff (8% ~ 12%) * value-added tax (9%) + port miscellaneous fees (250 ~ 300 yuan / ton).
At present, the domestic frozen meat import tariff is 8% for the general country (12% by January 1, 2020).
The CIF price of imported pork products is set by foreign pork suppliers, that is, the trade pricing power is in foreign countries, so although the price of foreign pork is relatively low in China, the price of imported pork will still be higher than the price of foreign pork, compressing the import spread. In addition, foreign pork suppliers generally determine the trade flow based on export profits. For example, U.S. meat companies exporting pork will compare the export profits of China, Mexico, Canada, Southeast Asia, Japan, South Korea and other countries and regions to export to countries with larger profits.
It is understood that the price difference between domestic and foreign pork is not the main factor driving domestic imported pork. Domestic importers import pork mainly from the expectation of future pork price trends. Generally, when pig prices are bullish, near-end imports and far-end sales can form import profits, which is conducive to promoting imports; on the contrary, when pig prices are bearish, domestic import enthusiasm is not high.
(3) How long the import cycle is
The import of pork begins with a purchase agreement with a foreign supplier and ends with the arrival of the shipment at the port, which takes about 3 months. The specific process, one is that the trader and the foreign factory reach an import agreement, which is carried out one month before the date of shipment for export. The second is loading and transportation. Depending on the distance, it takes about 35 to 55 days. For example, the transit time from Europe to China is about 35 days, the West Of the United States is about 25 days, and the east coast of the United States is 55 to 60 days. The third is to declare customs and report for inspection after arriving at the shore. After arriving in Hong Kong, it generally takes 3 to 5 days to complete customs declaration, tax declaration and inspection declaration. In the past two years, due to the pneumonia epidemic, the quarantine of imported goods, especially frozen food, has been strengthened, and the customs declaration and inspection cycle has been extended to about 10 days.
Overall, the whole process takes about 3 months. Since there is no effective hedging method for imported pork, the price is determined when the agreement is signed, and domestic importers face the risk of pork price fluctuations for the next 3 months.
Third, what is the trend of pork imports in the future market
In the context of global COVID-19, domestic pork imports in 2021 will be affected by the enthusiasm of domestic imports and the ability to produce and ship abroad. For China, the new crown epidemic has basically subsided, there have been occasional local recurrences, catering and resident consumption have gradually improved, and the fourth quarter and the peak consumption season at the end of the year have come, and pig prices have rebounded at the bottom. For foreign countries, the new crown epidemic has hindered the production and export of pork due to the frequent occurrence of slaughtering enterprises.
(1) The number of import shipments shows that there is still pressure
By country, Spain is the country with the largest export shipment volume to China in the first three quarters of 2021, followed by the United States, Denmark, Canada, and France; on the contrary, Ireland and Germany have fallen from high exporters in 2020 to sixth and seventh places in 2020 due to epidemic prevention and control reasons (Figure 5).
According to data from the Ministry of Commerce, although the number of shipments from major importing countries in January to September 2021 did not hit a new high in the same period, it was still higher than that of the general year in the same period, and the cumulative import shipment volume in the first three quarters of 2021 reached 98.28% in 2019 and 80.06% in 2020. Although the import shipment volume in the third quarter of 2021 was only 75.02% of the third quarter of 2019, it reached 150.19% in the third quarter of 2020 (Chart 6). According to the 3-month import cycle calculated above, even if the import volume in the fourth quarter of 2021 has decreased compared with the peak period in 2019, the year-on-year incremental pressure still exists.
(2) Customs data continued to decline
Combined with customs data, pork imports under the 0203 strain from January to September 2021 reached 227.88% in the same period in 2019 and 93.97% in the same period in 2020; pork imports in the third quarter of 2021 reached 155.43% in the same period in 2019 and 69.06% in the same period in 2020 (Chart 7). Under the caliber of customs statistics, pork imports have a continuous downward trend.
There are differences in the data between the two sides, mainly from the different statistical calibers, the number of importing countries counted by the Ministry of Commerce is relatively limited, and the new crown epidemic in foreign countries has been more serious in the past two years, the number of shipments in some traditional importing countries has declined significantly, and the real trade situation has changed. Relatively speaking, the statistics of the General Administration of Customs are more comprehensive, but we only extract the import quantity under some products, and cannot cover all imported pork and other offal imports.
In the first three quarters of 2021, the market price of live pigs and pork continued to fall, the industry continued to lose money, the industry pessimism was strong, and the enthusiasm for imported pork was frustrated. Therefore, we speculate that pork imports in the fourth quarter of 2021 will continue to decline, referring to the pork imports in the fourth quarter of each year before the ASF outbreak, the total import volume of pork in the fourth quarter of 2021 is about 300,000 tons, that is, the annual import volume is about 3.32 million tons, down 22.83% from the whole year of 2020 and 72.44% lower than the fourth quarter of 2020. Import pressure in the domestic pork market is expected to continue to improve. (Special writer of agricultural products collection and purchase network, author: Zhang Peiying, please indicate the source of reprinting, otherwise you will be held responsible according to law.) ）