By Dominique Patton

CHONGQING (Reuters) – China’s huge hog industry is in trouble because millions of small, sometimes first-time pig farmers have entered the sector to make record profits from a swine fever-related shortage.

Even though the prices of produce are at an all-time low and the government is encouraging them to reduce their herds to save money, some of the newcomers don’t want to quit, which dimming hope for the market’s return to balance.

Since July, we have been losing around 400,000 Yuan (62,500 dollars) per month. We made a profit last summer so we will keep going,” Wu Zhanhang said. Wu Zhanhang is a central Henan farmer, China’s most important pig-producing region.

Wu was like other pig farmers, entering pig agriculture for the first-time in 2019. This is after China’s top leadership urged for urgent recovery from a deadly African Swine Fever virus outbreak that nearly decimated half of its 447 million-strong population.

The country’s favorite meat, pork, saw profits rise initially. High production levels and COVID-linked interruptions in demand have caused prices to drop by 70%, leading to significant producer losses.

Wu owns a business that sells veterinary medicines and spent 6,000,000 yuan (935,000 USD) to buy a new farm. He now feeds about 5,000 pigs per day.

He was earning as high as 3,700 yuan ($470 per hog) last year, which is three times more than the highest income he had in previous years. He has sold fully fattened, full-grown piglets for less this year than when they were weaned.

(For graphic on Profits for farmers in China’s top pig-producing province: https://graphics.reuters.com/CHINA-SWINEFEVER/HOGS/movanjeblpa/chart.png)

SUPER-CYCLE

This dramatic turnaround in fortunes has enraged even the most powerful hog businesses and caused chaos across the sector as well as its suppliers.

The third quarter saw losses totaling billions in the Listed Hog Producers.

A feed company manager stated that many breeders have difficulty paying their suppliers and are cutting back on regular feed ingredients.

All of them have stopped or slowed down planned expansions. It told investors that Tech-bank Food Co Ltd leases out some of the newly constructed farms, halts construction on others and delays paying management salaries.

Dan Wang from Bank Shanghai is the chief economist. The huge expansion of new breeding farm has occurred at a point when pork consumption is still below ‘normal’ levels due to repeated COVID-19 flares that have reduced eating out.

Market watchers say that despite industry attempts to improve things, small producers are still betting on higher prices.

Official data shows that more than 2 million farmers moved into the sector in 2013. This was on top of an estimated 20,000,000 small-scale pork producers and 16,000 newly established large-scale farms.

Pan Chenjun (senior analyst, Rabobank) stated that the current market was caused by millions upon millions of farmers’ speculation towards African swine fever and related price expectations.

SOW SOCKS

A larger breeding herd is now than it was before African Swine Fever struck. Government officials issued last month a rare directive to farmers to remove less-productive sows.

Larger players have been getting rid ows for several weeks and now others are following their lead.

We have about 1,000 sows and we are going to kill half of them. Manager of small breeding farm in the northern Hebei province said that if you keep them you will lose more.

Some farmers are hopeful for a rebound, though. Wu, a Henan farmer claims he’s switched to less expensive feed and is able to weather the losses up until next year.

An analyst said that the modest October price increase also revived farmers’ enthusiasm for breeding and will probably prolong the time of low prices.

According to some market observers, it might take another epidemic of a disease in order to restore the market. African swine virus is still affecting farms.

Wang Chuduan from China Agricultural University stated that there will be a major disease outbreak by the end of next year. This will help speed up the elimination process of pigs. Next year, a new market for pigs will open.

($1 = 6.4021 renminbi)