November 12, 2019 / 8:33 AM / a month ago

China's pork prices slump on higher supply, falling consumption

BEIJING, Nov 12 (Reuters) - China’s pork prices fell sharply last week for the first time in 10 months, as reports of fresh disease outbreaks in the northeast led to more hogs being sent for slaughter just as consumers cut back on pricey meat, analysts said.

Chinese pork prices hit record levels after an epidemic of African swine fever killed millions of pigs in the world’s top pork producer.

Beijing says its herd has shrunk by 41% since a year ago, or almost 200 million pigs, and analysts say pork output will plunge by about a quarter, or 13 million tonnes this year.

Prices PORK-CN-TOT-D surged in October, reaching a high of 53.79 yuan ($7.69) per kilogramme on Oct. 23, up 188% from a year earlier. But they have fallen back since the end of October, reaching 50 yuan on Nov. 8.

“After recent price hikes, pork was already at a point where people can’t afford it, so it just took one trigger,” said Jim Huang, chief executive at China-America Commodity Data Analytics.

He believes the trigger was panic-selling by farmers in the northeast about two weeks ago, where reports have circulated of a wave of outbreaks of swine fever.

Reuters could not independently confirm the reports that had been circulating on a platform for investors. Officials in five counties of Heilongjiang province where outbreaks had allegedly taken place said there had been no recent disease.

But some additional slaughtering in the north allowed slaughterhouses to push down prices paid for live hogs, driving prices lower throughout the supply chain, said Pan Chenjun, senior analyst at Dutch financial services firm Rabobank.

Huang said lower prices also pushed traders to sell more frozen pork from warehouses.

WANING CONSUMPTION

In addition, consumption has declined about 30% since October due to the high prices, said Zhu Zengyong, a researcher at the Chinese Academy of Agricultural Sciences, citing a market survey.

In its weekly report, Beijing’s major wholesale meat market, Xinfadi, said in late October that about 10% of carcasses, and sometimes as much as 20%, were being returned to slaughterhouses unsold because of high prices.

Given that Beijing is likely more resilient than smaller cities around the country, consumption could have dropped substantially, Pan said.

“This is a correction of the very rapid price increase, not due to any oversupply,” Pan added.

But like others, she expects prices to recover soon.

“I think prices will go back to the previous range and probably go up again,” she said, pointing to rising demand in the coming weeks ahead of the year-end festive period and Lunar New Year holidays. ($1 = 6.9941 Chinese yuan)

Reporting by Dominique Patton and Hallie Gu; Editing by Jacqueline Wong

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