Pig farms in China are on the brink of bankruptcy as pork prices plummet

The real estate crisis has driven down consumer demand

According to Japan’s Nomura bank, the prolonged downturn in China’s real estate market is sharply reducing spending at restaurants – the largest consumer of pork. The slowdown in construction activity is also leading to decreased demand for pork from construction workers.

Economist Hannah Liu of Nomura noted that the two biggest consumers of pork are construction workers and people who eat out. “When both of these groups cut back on spending, it’s understandable that demand for pork would plummet,” she said.

Data from China’s National Bureau of Statistics shows that pork prices have fallen 39% over the past four years. The deflationary trend has only recently slowed due to rising energy prices caused by the Iran conflict.

Even large businesses are under pressure. Wens Foodstuff Group – one of China’s largest pork producers – reported a 43% drop in profits last year. The company’s pork prices in April were about 38% lower than the same period last year.

Meanwhile, although Dabeinong sold more pork, its profits declined due to price fluctuations and weak market conditions.

Beijing is concerned about the risk of economic instability

Following the 2019 ASF outbreak, China has encouraged the construction of large-scale pig farms, even multi-story pig-raising apartment buildings, to ensure food self-sufficiency. However, the country that consumes half of the world’s pork is now facing a serious oversupply.

Amid high youth unemployment, an unstable housing market, and increasing pension pressures, people are tightening their spending.

According to the restaurant industry data site Canyin88, the average spending per meal at Chinese restaurants has decreased significantly compared to a few years ago. Some localities have even banned civil servants from dining in groups of more than three people following scandals involving parties and alcohol.

And last month, in a series of high-level meetings, including one chaired by President Xi Jinping, officials stressed the importance of addressing the profound changes currently underway in the supply and demand dynamics of the pork industry.

To stabilize the market, Beijing has been continuously purchasing more meat for its national strategic reserves and instructing local authorities to increase procurement when prices fall below the warning threshold.

In 2019, when pork prices soared, the government used these reserves to help ease food costs.

Authorities have urged farmers to reduce the amount of pork brought to market by culling breeding sows. Managers have also set stricter weight standards for each pig, effectively limiting the amount of meat available for sale. At the same time, the government cut back on subsidized loans that it previously provided to large-scale pig farms looking to expand.

However, experts believe these measures can only provide temporary stability. “You can’t ask people or businesses to buy more pork,” said Hannah Liu. According to her, if purchasing power doesn’t recover, pork prices are unlikely to rise significantly again.