Pork futures in China have fallen to all-time highs as mass slaughter of pigs raises fears that the world’s second-largest economy faces a deluge of pork.
Growing fears that the local market might be inundated with meat have led to a drop of more than 30% in pork futures traded in Dalian, allowing investors to bet on the future direction of prices, since their launch in January.
The situation contrasts with that of the world’s largest pork producer, consumer and importer for most of the past two years, when outbreaks of African swine fever resulted in price spikes due to fears of shortage of supply.
Prices have been hit as authorities have encouraged farmers to raise more pigs and replenish the country’s pork reserves following ASF outbreaks.
Analysts say the situation has been made worse by farmers fearing a further drop in prices, advancing plans to slaughter their herds. Concerns over oversupply have also been stirred by some farmers fattening their sows to a weight of up to 300-400 kg – comparable to some polar bears – against their usual 200 kg, according to Chinese media.
On Tuesday, pork futures on the Dalian Commodity Exchange fell 7.1% to a low of 18,550 Rmb ($ 2,900) per metric tonne after it was reported that smaller hogs were also slaughtered, adding even more supply.
Wholesale pork prices in China have fallen nearly 50% this year to 23.57 Rmb per kilogram, their lowest price since late 2019.
“It’s really surprising how quickly and far pork prices have fallen,” said Darin Friedrichs, analyst at commodity broker StoneX Group in Shanghai.
China has struggled to contain swings in pork prices since ASF began ravaging the country’s pig herds in 2018.
Analysts said the latest futures price drop was in part a response to a report released on Friday by Beijing’s Xinfadi Market, a large wholesale market in the capital, which noted that smaller pigs were brought to the market.
This “indicates that some farms have significantly lowered their expectations for future meat prices as well. . . slaughter earlier than expected, ”according to the report.
The latest price swings prompted the Chinese cabinet, the National Development and Reform Commission, to issue a political statement last week promising to “maintain supply and stabilize prices in the pork market”, without specifying which were the measurements.
Pork prices are an important component of China’s Consumer Price Index, and their volatility has been a driver of its performance over the past year. Falling pork prices late last year helped push inflation into negative territory for the first time in more than a decade.
Friedrichs, of StoneX, said policymakers were hopeful that the introduction of futures contracts would help ease boom and bust cycles in Chinese pork prices.
“Now we’re in a downturn, so the volatility is still there,” he said.