Government aims to stabilise pork prices and reduce feed waste

China is taking significant steps to regulate the practice of pig refattening in an effort to stabilise the pork market and reduce feed waste. This move comes as the government seeks to address the volatility in pork prices and align with national goals of reducing grain use in livestock feed.

Background

The practice of refattening involves buying market-ready pigs from larger breeders and feeding them further to increase their weight, betting on future price increases. This speculative approach has been popular among small breeders and firms, but it has led to considerable price swings and inefficient feed use. The Chinese government, concerned about these fluctuations and the impact on feed resources, is now cracking down on this practice.

Market Implications

The crackdown is expected to have multiple implications for the pork market. By curbing refattening, the government aims to stabilise pork prices, which have been weak due to oversupply and sluggish demand. Currently, the market price for live pigs ready for slaughter has dropped to around 14 yuan per kilogram (EUR 1.69), significantly lower than the peak of 21 yuan (EUR 2.53) last year. The reduction in refattening could help balance supply and demand, potentially stabilising prices.

Moreover, the focus on reducing grain use in animal feed is particularly pertinent as China seeks to lessen its reliance on imported feed ingredients, such as U.S. soybeans. By discouraging refattening, the government hopes to improve feed efficiency, as pigs are most efficient at around 120 kg. Beyond this weight, pigs consume more feed but gain less weight, exacerbating feed inefficiencies.

Industry Response

In response to the government's stance, major pig breeders like Muyuan Foods have already halted sales to refatteners. This decision reflects the industry's alignment with regulatory changes and the anticipated impact on market dynamics.

The government seems intent on stabilising pork prices, which remain weak, while protecting small farmers from losses and curbing speculative behaviour.

| Pan Chenjun - Senior Animal Protein Analyst at Rabobank

The enforcement of these measures is reportedly stringent in regions like Guangdong province, indicating the seriousness of the government's commitment to reforming the pork industry.

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