China lowers breeding sow target in new guidelines

4 Mar 2024 | Jane Li

China’s agriculture ministry issued new guidelines Monday aimed at better adjusting hog production capacity, including lowering the normal retention target for breeding sow herds to 39 million head and creating more room for the number to decrease.

The new guidelines, which were first announced last Friday, were based on the ministry’s 2021-issued policy on adjusting hog production capacity, which at the time set the retention target of breeding sow herd at 41 million and the minimum retention quantity at 37 million, or around 90% of the retention target.

Since then, China’s breeding sow population has stayed largely above the 41 million mark, as farmers ramped up production after a wave of African swine fever outbreaks led to large scale culling between 2018 and 2021.

But as a result, the subsequent oversupply of pigs led to plunge in hog and pork prices in 2023, prompting the government to come up with new ways to improve the situation.

In the new guidelines, the ministry said that, as the efficiency of hog production has increased and the consumption of pork is stabilizing, the old policy issued in 2021 can no longer adapt well to the “new situation” and needs an update.

Among the updated measures, the ministry lowered the normal retention target of sow herds from 41 million to 39 million head, and deleted the mention of a minimum retention quantity.

Instead, the guidelines said the ministry would adjust the target dynamically based on changes in pork consumption and the hog production situation.

As of the end of January 2024, China’s breeding sow herd stood at 40.67 million, a 6.9% drop year-on-year, according to the ministry.

“This new policy can definitely be executed, as there are always ways to achieve them according to feedback from pig farms,” a Chinese broker told Argicensus.

Meanwhile, the lowering of the breeding sow herd target signalled to market participants that there are relatively excessive breeding sow stocks currently.

That in turn could hurt the confidence of pig farmers when it comes to raising more of the animal, while given the continued pressure on farmers’ cash flow due to losses in hog production industry, this month could see an accelerated pace of capacity reduction, wrote analysts from Kaiyuan Securities.

More room for fewer pigs

The new policy followed the same practice as the 2021 document in terms of also bringing three ranges marked by the colours green, yellow and red to reflect the level of fluctuations in breeding sow stocks and thus hog production capacity.

Green indicates normal fluctuations, while yellow means big and red excessive fluctuations in numbers.

Notably, it lowered the lower limits of the ranges, meaning there is more room for the number of fertile female pigs to decrease without triggering government policies for adjustment.

The new policy stipulates that the green range - which requires no government-led adjustment - is between 92% and 105% of normal breeding sow retention level, compared with 95% and 105% set in the 2021 document.

The new yellow range is set between 85% to 92%, as well as 105% to 110% of the normal breeding sow retention level, with the two sets of percentage points referring to big decreases and increases, respectively, which would require some adjustment measures.

That compares with the old policy that put the yellow range at 90% to 95% and 105% to 110%.

Finally, the new red range is at lower than 85% or higher than 110% of the normal retention level that would require “enhanced adjusting measures,” compared with lower than 90% or higher than 110% stipulated by the 2021 decree for this range.

Like the 2021 document, the new decree also stipulates that local governments could issue one-off financial aid to pig farmers who have sustained continuous losses of more than three months, but it increased the threshold for claiming this aid to CNY200 ($28) loss per pig on average from the previous over CNY100.