Sliding pork prices in China may be part of the reason behind the bans the country has placed on pork imports from certain U.S. states. Even China, which is the world’s largest consumer of pork, is seeing a supply/demand imbalance.
Industry insiders say that the influenza A (H1N1) flu virus has contributed to erosion in the wholesale price of pork in China’s Guangdong province.
"A lot of difficulties emerged in the industry of pig feeding and selling since last year, such as having an excess of supply over demand," said Zhou Hong, a deputy secretary of Guangdong feeding industry association, who pointed out that other factors were the main reason behind the slide in prices.
"Competition in the market has turned more severe but the A(H1N1) virus has aggregated the difficulties."
Disease problems in the Chinese swine herd over the past two years are partly responsible for the price erosion. According to Zhou, the reason for much of the oversupply began several years ago when the number of pigs being raised fell sharply in the second half of 2006.
Because of the resulting short supply the price of pork in 2007 and the first four months of 2008 rose quickly. "A kilogram of pork was sold at 20 yuan ($2.90) at that time – double the price of the previous year," he said.
The soaring price caused an influx of businessmen to invest in the industry, resulting in the supply of pork recovering and soon outstripping demand. “Consequently, the price started to drop last May,” Zhou said. "The wholesale price of a kilogram of pork dropped from 20 yuan to 12 yuan last year," he added..
"The price in the first four months of this year kept dropping," said Chen Sheng, president of Guangdong Tiandi Food Group, adding that the wholesale price for one kilogram of pork fell to less than 10 yuan last month, he added.
He warned that if the wholesale price of a kilogram of pork remained below 10 yuan in the fall, many producers may lose confidence in the business.