Pork outlook: the future of lean pork shows resilience

The pig trader’s point of view

This week’s lean hog futures rebounded from May lows, with the bulls still having the overall short-term technical advantage. US spot pork prices rebounded strongly this week, based on a direct national average. Lean pig futures rebounded on hopes of continuing Chinese pork purchases.

Lean pig futures were also improved a bit by the announcement of Argentina’s temporary beef export ban, with China being an aggressive importer of protein and particularly pork as a result of a devastating epidemic of African swine fever. China’s trade data released earlier this week showed the country’s pork imports for the first four months of the year stood at 1.59 MMT, up 18.1% from strong shipments from last year.

The upward price trend is still in place and the bulls have the strong overall technical advantage in the short term.

© Jim Wyckoff

Probably high-low price negotiation ranges for next week

  • June Lean Pork Futures – $ 107.92 to $ 113.00 and with a higher sideways bias
  • Soybean meal futures in July – $ 390.00 to $ 415.00, and with a lower bias
  • July Corn Futures Markets – $ 6.25 to $ 6.75, and a lower bias to the side

Latest news from the United States

US pork sales rebound somewhat from last week

The USDA on Thursday reported that US pork net sales of 19,000 metric tonnes (MT) for 2021 were up 29% from the previous week, but down 1% from the previous four week average . The increases mainly concerned Mexico (8,300 MT, including decreases of 700 MT), Japan (3,600 MT, including decreases of 200 MT), China (3,100 MT, including decreases of 700 MT), the Canada (1000 MT, including drops of 500 MT) and South Korea (1000 MT, including drops of 500 MT), were offset by a reduction mainly for Australia (200 MT) and New -Zeeland (100 MT).

Exports of 34,600 tonnes were down 17% from the previous week and 24% from the average of the previous four weeks. The destinations were mainly China (11,100 MT), Mexico (10,600 MT), Japan (4,500 MT), South Korea (2,400 MT) and Canada (1,100 MT).

Refrigerated meat counter at the grocery store
Pork sales in the United States rebounded from last week, but are still below the previous four weeks average

Updates from the Chinese pork industry

China Animal Feed Conference Discusses Pork Situation

The China Food Industry Exhibition and Conference was held in Chongqing from April 18 to 20, 2021, bringing together traders, analysts and government officials to share their views on food industry sectors. animal feed and pork. Key topics covered include initiatives by grain traders to diversify their suppliers, the impact of the latest African swine fever (ASF) outbreak, the accuracy of Chinese government data, and trends in feed production. .

Pig sector

ASF was a hot topic among exhibitors at the show, with reports the disease has become more serious, especially in northern China. Contacts noted declines in sow herds in Henan and Shandong provinces, with declines of 40% and 50%, respectively. Recent declines in pork prices have been blamed on producers selling their animals to reduce their risk of ASF losses. Some farms have reportedly sold their pigs underweight.

Southwest China seems less affected by ASF according to business contacts met at the expo.

The latest rounds of ASF outbreaks are expected to have a considerable impact on small pig and family farms. Sources have suggested that it will be difficult for them to survive, let alone expand their herds and operations, under pressure from falling pork prices, high feed prices and loss of pigs. At current prices, small farms will not make any profit according to meeting participants. Although large companies will suffer from the epidemic, they have larger reserves of capital to continue investing so that they can increase their market share on small farmers.

Indoor pigsty with slatted floor
Henan and Shandong provinces have been hit hard by African swine fever this year

According to some sources, some companies that have not expanded their operations in the past two years may choose to do so now. For example, a company whose parent company is a public enterprise can raise funds to invest in pig production. The company said it missed the opportunity to expand its business during the first ASF outbreaks and decided to increase its investments during this cycle.

MARA pig statistics The MARA intervenor stated that its data on the pig sector is reliable, as it is collected directly from the 178,000 large pig farms in the country (defined as farms with a monthly slaughter capacity of 500 head or more ). MARA claimed that the damage from the ASF resurgence was not severe, but instead some areas suffered from piglet diarrhea in early 2021.

According to MARA, this resulted in a monthly drop of 9.9% in the survival rate of newborn piglets in January and a further 1.3% in February. According to speaker MARA, the survival rate increased on a month-over-month basis by 4.4% in March compared to February 2021.

Chinese live pork futures tumble this week

China’s live pig futures fell sharply this week to their lowest level since launching in January. Analysts report that large volumes of heavy hogs are being sent for slaughter, weighing on spot prices. Some in the industry believe pig production could return to pre-African swine fever levels in the second half of the year, as long as there are no severe outbreaks of the disease in the south during the rainy season. The pressure on futures also came from weak seasonal demand for pork.

China’s leading pork producer encourages reduction in soybean meal use

Soybean meal only made up 9.8% of Muyuan Foods Co Ltd’s food mix in 2020, Chairman Qin Yinglin said this week. This compares to an industry average of around 18%, according to Qin. The company is China’s largest pork producer, selling around 18 million pigs in 2020.

Feed prices have skyrocketed over the past year, prompting China to issue guidelines for its livestock sector last month to reduce soybean meal and corn content. in animal feed. “We recommend a low protein diet for pig farming. Currently, the consumption of soybean meal for pig feed in our country is too high, ”Qin said at a conference.

The company has been working to reduce protein levels since 2000. He explained that Muyuan saved 28 yuan per pig by using less soybean meal and increasing the use of amino acids. If the whole country reduced its soybean meal consumption to 9.8%, it would reduce China’s soybean consumption by 20 million metric tons (MMT). The Chinese livestock sector typically imports around 100 MMT of soybeans per year. Muyuan’s efforts may inspire others to follow suit.

China reports sow herd increasing and approaching pre-ASF levels

The Chinese sow herd climbed 1.1% from March to April and is now up 23% from levels a year ago, state television reported recently, citing data from the The Minister of Agriculture. These data show that the April sow herd was at 97.6% of end-2017 levels; African swine fever hit in 2018 as producers grapple with another cycle of the disease this winter.

Xin Guochang, an agriculture ministry official, said producers have focused more on production efficiency, gradually replacing low productivity sows with high productivity sows. He details that the number of sows eliminated on large farms increased by 18% from March to April. Xin said China has 180,000 large pig farms, up 19,000 from the start of 2020. The number of newborn piglets is up 58.8%, he said.

Jim wyckoff

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