In recent times, the Chinese pork market has been facing dual pressures of continuous price decline and rising costs. According to reports from Reuters, pork prices in late March hit a 16-year low, causing widespread losses for pig farmers. Scholars interviewed pointed out that this situation not only reflects a supply-demand imbalance but also indicates weak domestic demand and structural economic issues in China. They mentioned that while the production capacity is adequate, the consumer demand is insufficient, leading the market into a critical adjustment period.
As reported by China Internet Information Center, on March 26th, the average price of pork in China was 9.43 yuan per kilogram. The price of live pigs has dropped to 4.76 yuan per half kilogram, officially entering the “4 yuan era.” Despite being in the traditional peak consumption season, there is still no sign of a rebound, presenting a scenario of “peak season not thriving, and low season even gloomier.” Some institutions even predict that the price of live pigs may further drop to around 4.5 yuan per half kilogram in the short term, reaching a new low in nearly 20 years.
Official statistics show that the downward trend in prices has persisted for some time. According to the announcement from the Ministry of Agriculture and Rural Affairs of the Communist Party of China, in February, the market price of pork was 23.73 yuan per kilogram, a 13.6% decrease compared to the same period last year, marking the eighth consecutive month of year-on-year decline. The price of live pigs was 12.82 yuan per kilogram, a 19.9% decrease from the previous year, marking the eleventh consecutive month of decline.
Furthermore, data from the National Development and Reform Commission monitors the feed-to-pork price ratio, which has deteriorated continuously. From 5.59:1 in February, it dropped to around 4.40:1 in the week of March 18th, significantly lower than the breakeven line of 6:1, indicating that the profit margins for pig farming are being consistently squeezed, with the industry being in an overall loss-making state.
When asked about the prolonged low pork prices, interviewed scholars attributed it to a core issue of supply-demand imbalance. American economist Davy J. Wong expressed that the current plunge in pork prices to a 16-year low should not be oversimplified as “people can’t afford meat,” but rather a result of simultaneous oversupply and weak demand.
He explained that the extensive expansion of the breeding industry in recent years has led to a situation where the number of sows exceeds the reasonable level, combined with a lackluster recovery on the consumption side, leading to sustained price pressure.
Internet users lamented about the historical unprecedented streak of six consecutive days of decline in the pork market, with both the depth of decline and the duration exceeding any previous cycles. Chinese commentator Wang He shared a similar view during an interview, attributing the drop in pork prices to production capacity expansion and sluggish consumer spending.
He further pointed out the so-called “pork cycle” in China, where pork prices are considered a significant indicator reflecting residents’ consumption and livelihood. By maintaining a balance between supply and demand through pork prices, the overall performance can be observed.
It is worth noting that Wang He emphasized that while the demand side in China remains stable, the rapid expansion of supply has created an obvious oversupply situation, reflecting an issue of insufficient domestic demand momentum.
A recent survey by recruitment company HAYS, cited by Reuters, revealed that 51% of employees in China did not receive a raise last year, the highest rate in Asia. Additionally, about 10% experienced salary cuts.
Half of the surveyed Chinese citizens expect their salaries to remain stagnant or decrease this year. Official figures state that around 16% of young people are unemployed; however, when factoring in “hidden unemployment” and “underemployment,” an additional correction estimate of 10% to 15% needs to be considered.
Apart from weak demand, international developments have added further pressure. According to Reuters, the escalating situation in the Middle East has led to a rise in international oil prices, boosting transportation, fertilizer, and agricultural input costs in China, consequently elevating feed prices.
Data indicates that in March, the spot prices of soybean meal and corn in China increased by over 7% and 4%, respectively, with an additional cost of around 200 yuan and 100 yuan per ton.
Davy J. Wong pointed out that this is not merely a slight rise in oil prices but rather a situation where the entire agricultural input cost chain has been elevated due to the conflict. He criticized China’s energy system for its monopolistic characteristics, taking advantage of the situation to raise prices and further burden pig farmers.
Xie Tian, a professor at the University of South Carolina’s Moore School of Business, told Dajiyuan that the Iran conflict has pushed up global fertilizer prices. Although China has not been immediately affected, the future impacts of the rising costs will gradually emerge.
Under the dual pressure of falling pork prices and rising costs, pig farming has generally fallen into losses. According to Reuters data, the cost of raising a pig weighing between 60 to 62.5 kilograms is approximately 12.2 to 12.5 yuan per kilogram. However, market prices are far below the cost, resulting in losses of around 280 to 350 yuan per pig.
In a situation where costs exceed the selling price, Davy J. Wong stated that the most vulnerable are definitely the small and medium-sized pig farmers, who have weaker risk-bearing capabilities and financing conditions, possibly forcing them to exit the market. Although large-scale farming enterprises have the advantages of scale and financial support, their profits will be significantly squeezed.
From an industry structure perspective, Wang He speculated that the concentration of China’s pig farming industry (a small number of giant enterprises accounting for a large market share) has exceeded 30%. With increasing production capacity and rising costs, “small and medium-sized pig enterprises are finding it increasingly difficult to survive, while large pig enterprises will claim more market share,” illustrating a clear industry concentration trend.
In response to the sluggish market, authorities have intensified control measures, such as reducing the number of sows, controlling slaughter rates, and initiating frozen pork acquisition and storage to stabilize prices. However, as of the end of last year, the national inventory of sows stood at 39.61 million, still higher than the target of 39 million, indicating that the progress of “cutting overcapacity” has not yet been fully achieved.
However, interviewed scholars generally hold a cautious attitude towards the effectiveness of these policies. Davy J. Wong pointed out that the storage measures can only buffer the situation but not address the root cause, which lies on the demand side. He expressed that “even if the supply is compressed, there might be an overcapacity issue again if residents’ income, consumption confidence, and domestic demand do not improve.”
He also believed that the relevant policies are mostly “superficial measures,” while structural reforms such as opening up monopolies, improving the private sector business environment, and increasing residents’ income are challenging to implement.
Xie Tian bluntly stated that the current situation fundamentally reflects a “contraction of the Chinese economy,” stemming from increased unemployment and declining income, leading to weakened purchasing power. He remarked, “Deflation causing a decline in pork prices is the real issue.”
Wang He added that the conflict in Iran is a short-term factor, and the actual market trend is determined by “long-term structural factors,” such as weak consumption and imbalances in production capacity rhythm.