Tag: Pork Industry

Plummeting Pork Prices Pose Deflation Threat to China

Rapidly falling pork prices in China raise concerns of deflation risk, as major hog farmers flood the market. Discover the economic implications and strategies amid this price drop.

Pork Price Plunge Threatens China with Deflation Crisis

Falling pork prices could potentially push China back into a deflationary situation in the near future. This is because major hog farming companies in the country are flooding the domestic market with their products, complicating Beijing’s efforts to boost confidence in the second-largest economy globally.

Live hog futures on China’s Dalian Commodity Exchange have seen a significant 15% decline since the beginning of October, reflecting a sharp downturn in expectations for pork prices nationwide. Wholesale pork prices in China have dropped by over 40% compared to the same period last year.

Economists are predicting that the declining cost of pork, which holds substantial weight in China’s official consumer price index, will likely lead to deflation when October’s data is released this Thursday.

Julian Evans-Pritchard, a senior China economist at Capital Economics, commented, “It appears that consumer inflation will turn negative again in October, mainly due to a decline in food inflation caused by the fall in pork prices.”

A return to deflation, following weak growth in August and a flat CPI reading in September, could undermine the Chinese government’s efforts to restore confidence in the country’s fragile economy. This fragility is attributed to weak consumer confidence and a liquidity crisis in China’s property sector.

The price of pork in China, the world’s largest producer and consumer of pork, has historically followed a boom-and-bust cycle as small-scale farmers enter the market in response to rising demand, leading to oversupply and sharp price drops. Beijing has attempted to gain more control over this cycle by consolidating production among a few large-scale farming companies. However, this year, these same companies have contributed to the price decline.

Pork prices started to rebound in July, partially due to government-led purchases, but then fell again as major listed hog farmers, including Muyuan and New Hope, chose not to reduce production despite weaker demand. Typically, larger producers cut output by selling breeding sows and purchasing fewer piglets to raise until prices recover. However, Chinese piglet prices have only fallen by 10% compared to the previous year, indicating relatively strong demand for young pigs despite the significant drop in pork prices.

Analysts suggest that this strategy paid off last year when a fourth-quarter recovery in pork prices, coinciding with the easing of China’s strict COVID-19 restrictions, allowed top producers to increase revenues at the expense of smaller farmers who were forced out of the market.

Darin Friedrichs, director of market research at Sitonia Consulting in Shanghai, noted that major Chinese pork producers are following a similar strategy this year, but there are no signs of an imminent fourth-quarter rebound in demand. Some pork producers are even selling subsidiaries or having executives buy back stock, indicating increased financial pressure on them.

Muyuan, the world’s largest hog farmer, has seen its stock decline by more than 20% this year, even after announcing a share buyback worth approximately Rmb1bn ($137 million) last month. The company recently canceled a planned share sale in Zurich, citing “objective factors” in a filing to Shenzhen’s stock exchange.

Friedrichs added, “Part of the problem is that many of these major companies have, to some extent, accepted the boom-and-bust cycle and believe they are better at managing it than their competitors.”

Meat Industry’s Troubles: How Major Meatpackers Battle Rising Costs and Slumping Sales

Discover the challenges faced by a major meatpacker as it grapples with soaring costs and declining sales in the pork industry. Dive into the complexities of this narrative and its impact on both consumers and farmers.

A major meatpacking company is grappling with the challenge of high expenses and sluggish pork sales.


In the realm of meatpacking, a colossal struggle unfolds as one major player grapples with soaring costs and dwindling sales of pork. It’s a narrative that strikes a chord, not only with consumers feeling the pinch but also with the small-scale farmers that often operate behind the scenes of these corporate giants.

Consider, for a moment, WH Group, the Hong Kong-based proprietor of Smithfield Foods, a heavyweight in the American pork industry, and WH itself, the unrivaled global titan in the meat processing sector, boasting control over every facet of the meat production process, from hog farming to processing, packaging, and distribution. In the annals of 2022, Smithfield raked in an impressive $126 million in sales. But fast forward to the third fiscal quarter of 2023, and the company’s tune has undergone a somber transformation. Profits have plummeted noticeably, with no immediate signs of a comeback.

The numbers tell a stark story: Smithfield incurred an operating loss of a staggering $431 million from Q1 to Q3. This dramatic plunge has cast a long shadow over WH Group, with an overall profit decline of 36% compared to the previous year. Paradoxically, WH’s markets in Asia and Europe seem to be weathering the storm, with sales either holding steady or even showing improvement. According to the National Pork Producers Council’s report, the costs and breakeven points have surged by 9% in the past year alone, marking a jaw-dropping 60% increase over a span of three years. Despite farmers grappling with relentless production costs, the value of pork in Q3 of 2023 has dipped by 20% compared to the same period in 2022. In a recent earnings announcement, the WH Group’s board of directors offered a cautious glimmer of hope: “We will strive for the best results amid the highly uncertain external environment.”

This narrative of financial turbulence extends its reach to affect not just corporate bottom lines but also the livelihoods of farmers and the wallets of consumers alike. Pork belly prices have witnessed a meteoric rise, soaring by an astounding 106% year-to-date in 2023, leaving many inflation-weary shoppers bewildered. Yet, the truth is that farmers are grappling with inflation just as heavily as their grocery-store counterparts. Inputs such as corn feed (up 79%), gasoline (up 48%), and refrigerated trucking (up 50%) have witnessed exponential price hikes from January 2020 to April 2022. Furthermore, a wave of diseases has taken a toll on hogs in major production states, reducing their weight and consequently diminishing the amount of usable meat per animal.

Adding to the complexity of this narrative is California Proposition 12, a formidable regulatory challenge confronting Smithfield and other producers. The mandate stipulates the need for 24 square-foot stables to house pig livestock, a requirement fiercely contested by many farmers as excessively large. Simultaneously, consumer demand for meat and pork appears to be on a downward trajectory, possibly influenced by concerns over price or the growing popularity of plant-based protein alternatives, which have flourished and diversified in recent years.

To counterbalance the setback, WH Group has embarked on a journey of cost reduction, marked by a reduction in its operational scale. This strategy involves the closure of a processing plant in North Carolina, the shuttering of 35 farms in Missouri, and efforts to transform Smithfield Foods into a publicly-traded entity, with potential shares to be traded on the U.S. stock exchange. Yet, it’s essential to acknowledge that these strategic decisions carry tangible repercussions for farmers, as underscored by the unfortunate layoffs of 92 salaried and hourly employees resulting from the mass closures in Missouri.

Exit mobile version