Surging China demand buoys US pork

CHICAGO - US pork exports will jump 23 percent or more this year because of surging demand and prices in China, the world's top consumer, according to Brett Stuart, the co-founder of farm-industry researcher Global AgriTrends.

"The tinder is set," Stuart said during a conference call organized by AgStar Financial Services Inc, an industry lender in Mankato, Minnesota.

"All we need is a spark, and we could see some massive volumes going to China. There's really no reason we're not going to see a massive rush of US pork shipped to China."

Retail prices rose 57 percent year-on-year last month in China, and the wholesale average reached a record 25.5 yuan ($3.9) a kilogram on July 1, Stuart said.

The US wholesale equivalent was 98 cents a pound, he said.

US pork shipments to all countries, including China, may rise to 2.35 million tons this year from an estimated 1.92 million tons last year, Stuart said in a telephone interview from Denver.

The US is exporting about 24 percent of its pork output this year, with the "potential to see that grow through the summer", Stuart said. About 19 percent was exported last year, up from 18 percent in 2009, government data show.

Hog futures have climbed 21 percent on the Chicago Mercantile Exchange in the past year.

Wholesale-pork prices are up 20 percent from a year ago, government data show.

"The biggest impact on pork prices today has been exports," Stuart said. "The increase in exports has reduced our net supplies."

In the first five months of this year, shipments to Hong Kong and the Chinese mainland were a combined 23,482.48 tons, up 37 percent from a year earlier, US Department of Agriculture data show.

China has announced plans to release pork reserves into the market at the "appropriate time" to help stabilize prices. The government has 200,000 tons of reserves and may increase stockpiles, Yao Jian, spokesman at the Ministry of Commerce, told a regular briefing in Beijing last week.

State-owned reserves make up 0.4 percent of China's average annual consumption, or enough for 1.5 days, and it won't be enough to ease prices, Stuart said. Consumers are eating roughly 140,000 tons a day.

"They simply don't have enough to make a difference if China has a shortfall in pork," Stuart said.

China produced an estimated 51.07 million tons of the meat last year, and that should be able to supply enough to satisfy 98 percent of rising domestic demand, Stuart said.

Hog farmers are making enough money to encourage herd expansion, as they may add 2.5 million to 3 million sows over the next year, Stuart said.

Bloomberg News

(China Daily 07/22/2011 page14)