While the singer Ray Charles may have had Georgia on his mind, the Irish and European pig industries have definitely got China on their minds.

Most people know that China is one of the most populous nations on earth with 1.4 billion people, but not many know it also contains the largest pig population in the world at an estimated 435 million pigs – 50% of the world total.

However it is not the size of the industry that is interesting but their rate of change.

Two aspects of the Chinese pig industry are currently experiencing massive changes; pig farm relocation and pig meat consumption.

Farm relocation

The pig farm relocation programme is the largest movement of farm production the world has ever seen.

Traditionally the majority of pig farms were located in southeast China but due to issues with environmental pollution the government is now locating the farms to China’s ‘bread basket’ in the west and northeast where existing tillage will allow the pig manure to be recycled.

USDA 2017

It is estimated that the production of 36 million pigs will be moved as part of this process, which is equivalent to moving a quarter of the total EU pig herd.

The effect of this change is that tens of thousands of smaller pig units in the red zones are being forced to close or relocate with a resultant decrease in the national pig herd.

The herd has reduced by 13 million sows since 2013 and this decease has accelerated in recent months with a 4.8% and 5.0% decrease in July and August respectively.

To put this decline in context, it is the equivalent of the Spanish herd (largest in Europe) going out of production every month.

The Chinese government hope to have much of the relocations achieved by this December after which the sow herd size is expected to stabilise.

Pigmeat consumption

The rate of meat consumption in most countries remains relatively stable from year to year with Ireland currently consuming 28kg of pig meat per head.

However the rising Chinese income levels and resultant increased buying power has generated a rapid increase in pig meat consumption.

It has grown from 12kg per head in 1980 to 40kg today, a 333% increase which would be amazing in a small country like Ireland but when it is based on 1.4 billion people the increase in pig meat consumption is simply staggering.

The World Bank expect the average Chinese income per capita to rise by a further 40% over the next six years so the expectation is that pig meat consumption will continue to rise.

This indicates that the percentage of pig meat that China has to import will continue to rise over the next few years from its current 4% of consumption (2m tonnes) to 8% over the next five years.

Is this great news for Irish and European pig exports? At the risk of appearing indecisive; yes and no. Yes, they will require more pig meat, but will this increase come from the EU? Probably not.

Irish and European exports

The last three years have seen a rapid increase and rapid decrease in the volume of EU pig meat exports to China.

The rapid increase was due to the shortage of Chinese pig meat which required a significant increase in imports.

When they looked for sources of pig meat the US were feeding Ractopamine (a growth promoter) to their pigs so the only source of growth promoter-free pigs in sufficient quantities was Europe.

As a result European exports to China doubled during 2016. Unfortunately in the interim the US has stopped feeding Ractopamine to a large percentage of their pigs so they are free to export to China and they can now also undercut the EU price due to the very favourable US Dollar-Euro exchange rate (€1=$1.17).

This has resulted in a rapid reduction in EU exports (down 32%) to China in 2017.

The Irish pig meat export trend is very similar but our total export decline in 2017 (-14%) has thankfully not been as extreme as for our European neighbours.

So will Irish pig farmers be whistling all the way to the bank in 2018?

The reduction in the Chinese sow herd is going to have a market impact throughout 2018 and the rate of rising incomes and pig meat consumption will continue to cause a pig meat supply deficit in the next three to five years.

The big question is where will they source the product from to fill this deficit? The EU will continue to be a significant source but the expectation is that we are unlikely to see the exports highs again of 2016 unless there are health/regulatory issues with US pig meat.

However China will continue to be a big importer of Irish and European pig meat so we’ll continue to keep China on our minds.