Weak pig prices tend to discourage China imports

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Porto Alegre, June 17, 2021 – Wholesale and live pig prices are seeking recovery in Brazil’s Center-South in the first half of June, in a scenario of tighter supply and demand, with high production cost and depressed margins. Replenishment in the chain shows good fluidity, with slaughterhouses managing to sell meat more satisfactorily and actively engaged in the purchase of animals. The outlook is optimistic in the short term, with capitalized households and attractive pork prices compared to beef cuts. The price of beef is an element that tends to help the demand for pork cuts in 2021, but it is noteworthy that in a difficult economic environment and with aggressive new highs in pork there might be a large migration to chicken. The advance of vaccination in the country is also an important factor that could lead to greater consumption, however, the process tends to be long.

Another important variable that deserves extra attention over the coming few months is exports, which may be affected by the situation in the Chinese market, as will be pointed out below. So far, Brazilian exports have been strong. According to COMEX data, in May, Brazil exported 99,826 thousand tons of pork (fresh and processed), practically unchanged from the same month of 2020. In the first five months of the year, Brazil exported 444.38 thousand tons, up 18% from 376.24 thousand tons registered in the same period last year. Nearly 53% of what Brazil exported over the year were bound for China and, if added to Hong Kong (considering that indirectly part of the volumes end up entering the interior of mainland China), the index reaches 68.4%, showing the great dependence, which inspires care.

China – the Asian country counts on signs that suggest a decline in its import appetite over the next few months, starting with the meltdown in the prices of pork, live pigs, and piglet in the interior of the country. As reported by China’s Ministry of Agriculture and Rural Affairs (MARA), the live kilogram ended the first week of June pegged at 17.52 yuan on average, down 49.66% from the end of 2020, being the lowest level since July 2019. Pork, on the other hand, fell 42.98% in the period, now positioned at 29.45 yuan. A kilogram of piglet averaged 63.28 yuan in the first week of June, down 25.5% from the end of 2020 when it was at 84.94 yuan.