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China's hog raising industry is mostly backyard raising at small scale. Since 2005, the opportunity cost of emigrating to urban areas for work has increased and environmental regulations have intensified. As a result, the number of backyard raising households declined substantially and hog raising is now of larger scale. As of 2015, more than 50% of hogs were slaughtered at farms with more than 500 hogs going to market per year.

Large-scale production has huge room to improve. In the U.S., the process of scaling up hog raising has almost finished and the share of CR10 hog companies has reached 41%. By contrast, China's largest hog raising company, Wens, only takes up 2.4% of the market.

The industry enjoyed a good year in 2016. In early June, the hog price hit a record high of 21CNY/kg. Meanwhile, corn prices were in the decline, enriching the profits of hog raising. However, environmental concerns and the removal or moving of hog farms in southern regions dampened replenishment of hog stock, continuing the decline of sow population. In January, 2017, the inventory of sow decreased to 36.51 million, a new low since 2009. Delayed restock of sow will result in decreased pig supply a year later. Therefore, it is expected that China's hog supply will not be easily increased in 2017, extending the prosperity of the industry.

Imports surge from the difference between international and domestic hog prices. The impact of "foreign pork" should be noted. In 2016, China imported 1.62 million tons of pork, up by 108% YOY. The average import price was only 13 CNY/kg, far lower than domestic prices. The price difference has not yet narrowed, thereby might result in continued increase in pork import in 2017. This will bring impacts on domestic hog supply and hog prices will find it hard to hit another high.

CRI considers in 2017, hog prices will slowly decline with fluctuations. Overall profitability is still promising and the annual average price is expected to reach 15-16 CNY/kg.

 

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