The Asian behemoth is currently in a transitional period of economic and technological development; new trends, like convenience, are influencing consumer demand; and social issues are putting climate change and the need for emissions reductions under the spotlight, found a new report from the bank’s swine market focused analysts.
Between January 2003 and June 2022, China’s pork market went through five full cycles, each lasting around three to four years, they noted.
This latest cycle started in mid-2022, following a year in which hog prices bottomed out with great losses for the industry. It will differ from previous ones, as the market is more consolidated, economic growth is slower, and there is a greater social and environmental focus in China, said the team.
“Top farming companies have increased their market share, helping to smooth out cycle volatility. Consumers are becoming more segmented and more sophisticated [and] value growth is increasingly important as a result. Achieving sustainability in China requires balancing food security and environmental protection. Large parcels of land for livestock production will be increasingly difficult to find.”
Market opportunities will be available to both local and global players, as a result of those developments, with considerable growth potential, found the publication.
“We expect the new cycle to have less price volatility and a slightly shorter length compared to previous cycles,” concluded Chenjun Pan, senior analyst, animal protein, Rabobank. “Where cost leaders were the survivors from the previous cycle, in the longer term, winners will be those who are not only cost leaders but are also able to integrate supply chains.”
Pan highlighted swine productivity development as a Chinese government focus, it has identified genetics as a core strategic development area. “Future development will focus on establishing a breeding system that is independent from the foreign breeder supply. New technology like automated equipment, robots, AI, etc., can be adopted to reduce costs.”
Market consolidation is growing. “With the exit of small players, we will see rising competition among large players. In a slow-growing market, competitiveness will come from cost leadership, quality, market reputation, and corporate social responsibility (CSR) efforts.”
Given the strategic importance of its pork supply, the analysts expect China to continue to import pork as an important supplement to its domestic supply.
“Although the import volume is expected to decline in 2022, China will remain the world’s largest importer with imports returning to a ‘normal’ range in this cycle. Importers will shift to a combination of trading and own processing and distribution.”