Like two ships sailing in the night, China’s pork supply and demand are missing each other, causing huge losses and accelerating a shift away from pork being the dominant meat in China.
Pork and rice are two critical staples in the diet in China and, therefore, the price and supply of both are held as a high priority by China’s government.
Since 1978, China’s pig industry has been going through consolidation and professionalisation, as China moved from backyard farming where pigs ate swill from kitchens, to scaled farming with professional feed mills.
African swine fever (ASF) has been a key shock to the supply side dynamics in China. Firstly, since the first wave in 2018, the landscape of China’s pig producers has changed dramatically and industry losses suggest over US$120bn to date.
ASF spreads rapidly and continues to be deadly, having wiped out hundreds of thousands of small and medium producers, and having pushed pig farms into more remote areas where biosecurity risks can be managed.
During the most dramatic outbreaks, China’s sow herd was diminished by 30%, leading to very high pork prices, almost 50% higher than prices in 2022.
The government has therefore initiated a robust policy to support a small number of highly integrated pig enterprises that will be able to provide pork at scale to feed China’s enormous population.
The largest of these players now owns a staggering 3m sows and China has moved to oversupply and the price of pork has bottomed out.
Demand side dynamics
There are essentially two markets in China. The first market is that of approximately 900m people who still live on a monthly salary in the region of €300 (or less). These are mostly rural or migrant workers in large cities and are highly price sensitive.
The second large market is the middle and upper class, which makes up a 500m market.
The government’s supply side dynamics are largely aimed at the 900m workers and providing food security to this group.
However, this group continues to struggle economically, as the slower GDP and domestic growth places further downward pressure on them.
This group will still largely choose pork as their main meat staple, but will also, as price conscious consumers, choose to do with less meat, or also choose cheaper animal protein in many cases.
The other 500m broad market segmentation is turning away from pork for a variety of other different reasons.
Firstly, the taste profile of pork in China has disimproved as changes in genetics, feeding and production strategies due to ASF have impacted and changed the flavour of pork.
The more discerning pork customers with extra buying power are not only moving away from pork due to the changes in flavour, but also the industrial pork production system (one 26 storey farm purports to finish 460,000 pigs each year) doesn’t provide much in terms of brand, differentiation and providence.
The only bright spots in terms of opportunities for pork in the overall market are around branded pork products that use some local genetics with superior taste profile, or imported pork.
Declining population
This move away from pork is taking place against a backdrop of a declining population, and yet the suppliers and government will plough forward with cheap, industrialised food and consumers will continue to vote with their wallets.
Thirty years ago pork made up most of the meat consumption at around 80%. This dropped to just over 60% last year. Unless there are some significant changes, pork will end up at less than half of China’s meat consumption providing more opportunities for poultry and beef.
From an Irish industry perspective, clearly vigilance is required in continuing to ensure ASF doesn’t make its way from mainland Europe to Ireland and secondly, our supply and demand ‘ships’ can always do more to align.
SHARING OPTIONS: