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China has unveiled rules that aim to more tightly control the world’s largest pig population, after recent growth in herd numbers weighed heavily on pork prices.
The country’s agriculture ministry said in a statement on Monday that its herd size guidelines should be “better used” to “prevent large fluctuations in pig production capacity” after a period of volatility.
China’s pig herds, which account for about half of the world’s total, were devastated by an outbreak of African swine fever between 2018 and 2021, leading to widespread cullings, higher prices and a push for more production than in the past. Subsequent years led to volumes returning to the point of overcapacity. China’s pig population stood at 434 million in 2023, up sharply from a low of 310 million in 2019.
As a result, the price of pork, a staple commodity in China and the largest component of its closely watched consumer price index, has fallen sharply, adding to a broader climate of deflation that has put pressure on Beijing in recent years. last six months.
The government said its regulations need to be updated “as pig production efficiency continues to improve and pork consumption tends to stabilize,” and that it will continue to implement long-term targets for breeding sows .
Last week, the government reduced the target for maintaining breeding sows from 41 million to 39 million in a notice saying it would pay close attention to disease control, including African swine fever.
Fitch, the ratings agency, noted last week that “overcapacity in China’s pig farming sector is likely to persist into the second quarter” and that most farmers are “likely to continue to face losses.”
He highlighted a “reluctance to downsize” in the market that “may partly stem from a desire to keep them [breeders’] leadership positions on the market and recover previous investments”.
Consumer prices in China fell 0.8% in January, driven by a 5.9% drop in food prices and a 17% drop in the price of pork. Excluding food and energy, core consumer price growth was positive at 0.4%.
According to a Nomura analysis of the latest available data, pork prices fell 13.6% in 2023. On a monthly basis, they fell 0.2% in January, suggesting unusually weak appetite from consumers despite the start of the lunar new year.
“The flat reading of pork prices in January contradicts the seasonal increase in pork prices that usually occurs in the run-up to the Chinese New Year holidays and indicates weak demand for pork,” the bank’s analysts wrote Japanese.
Additional reporting by Wang Xueqiao in Shanghai