Earlier today we got news that Chinese company Shuanghui International Holdings Limited intends to acquire Smithfield Foods.
Smithfield is America's largest pork producer. Meanwhile Shuanghui holds a majority stake in Henan Shuanghui Investment & Development Co., which is China's largest meat processing enterprise.
China is the world's largest pork consumer. It overtook the U.S. in
- Half of the world's pigs, about 476 million are said to reside in China, according to the Earth Policy Institute.
- Chinese pork consumption was expected to total 52 million tons in 2012.
- China became a net importer of pork in 2008. It has imported approx 400,000 tonnes of pork per year in recent years. This compares with global pork trade of less than seven million, according to Rabobank.
- The Chinese diet used to largely consist of grains until the the economy opened up in the 1970s. Annual per capita meat consumption in China has increased fourfold since then, to 37 kilograms (approx 82 pounds) of pork, 13 kgs of poultry, and 9 kgs of beef and sheepmeat.
- Pork's share of meat consumption fell from 80% in 1985, to 65% in 2011.
- Despite the recent decline in pork prices, in the past decade, Chinese pork prices have more than doubled.
- Pork consumption volumes are expected to grow at a slow pace of 1-2% annually, according to Rabobank.
- The biggest driver of Chinese pork consumption will be lower income groups in rural areas and the rural populace.
- "Hog production in China is conducted by three categories of producers: backyard farms, specialized households and commercial farms. While there is no strict definition of the three types of farms, backyard farms usually raise less than 50 hogs at one time, specialised farms raise 50 to 3,000 hogs and commercial farms raise more than 3,000 hogs in inventory."
- Sichuan, Henan, Shandong, Hunan, Hubei and Guangdong, are the biggest pork production areas in China.
- China has a pork price monitoring system. A hog-to-corn price ratio of six is considered to be a break-even level for pig farmers and is used as a gauge to check is Chinese pork supply is stable and to get a better sense of farmer's income. If the ratio rises over nine the government might release more pork into the market, if it falls below six they could purchase pork to support prices.
- China has a national pork reserve that has existed since 2007. It has both live hogs and frozen pork.
- "The live hog reserve typically consists of a few million hogs, which are rotated every four months within 200 to 300 commercial farms. …It is estimated that there are about 200,000 tonnes of frozen pork in reserve, which will be rotated every four months to ensure its freshness and quality."
- The decline in prices is causing China's pork industry to consolidate.
Here's Rabobank's estimate on where the Chinese pork market is headed:
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