Fat herds, leaner profits: For China’s swine farmers, New Year feasts bring cold comfort
BEIJING: With China’s Lunar New Year festivities fast approaching, swine farmers in the world’s biggest pork market have little to cheer.
As they fatten herds to meet peak demand, a slump in retail prices and a spike in feed costs are grinding up profits.
A wave of imports has squeezed pork retail prices 10 per cent since they hit record levels in June on a domestic supply shortage.
Meantime, the price of soymeal has hit a 2-1/2 year high in Sichuan as farmers buy up stock to feed up pork for the New Year ‘golden season’.
As Chinese consumers tuck into cured pork and stews for the holidays – starting in late January this year – farmers will have to soak up profit margins that have halved in six months during a buying spree that accounts for a quarter of annual pork consumption.
While profits are still close to historically high levels, the fall comes on top of food safety scandals and belt-tightening as economic growth stalls.
China’s swine farmers also face a growing concern: appetite for what is traditionally the country’s favourite meat is waning in favour of cheaper alternatives like mutton and poultry.
“We’re in the hottest season for pork consumption...but the scale of the increase (in demand) is lower compared with previous years,” said Fang Yonghui, analyst with pork consultancy Soozhu.com.
In Sichuan, China’s largest swine farming province, account- ing for 10 per cent of national pork production, profit margins have slumped 45 per cent to 650 yuan per swine since May, when they touched their highest on records going back to 2009.
Fang expects profit margins nationwide to average 300- 400 yuan per swine next year.
That’s well up from the average of the past five years, but down from bumper levels earlier this year.
In the eastern province of Shandong, meanwhile, some are bracing for things to get worse.
“2016 was a money- making year,” said one Shandong farmer with 1,000 breeder swines, speaking on condition of anonymity.
“And in 2017, it’s likely going be loss-making. Many dare not expand the herds even if they are making profits now.”
An estimated 140 million swines will be slaughtered in the two months leading up to the weeklong New Year holiday, making that period the busiest months of the year accounting for 20 per cent of the annual average total.
Yet that comes as weekly average national pork prices hover around 28 yuan ( US$ 4.03) per kilogramme, close to their weakest levels in calendar 2016.
Higher costs of feed compound the headache for breeders like Guangdong Wens, the nation’s largest, in the months before herds head for slaughter. — Reuters