China hog prices hit 14-month high as African swine fever slashes output

[March 11, 2019]  By Hallie Gu and Dominique Patton

BEIJING (Reuters) - Chinese hog prices marched to their highest in 14 months on Monday and look set to keep rising after weeks of gains, analysts and producers said, as the worst disease outbreak to hit the country's vast pig herd in years chops supply.

Live hog prices in major consumption and production areas rose 7 percent on average on Monday compared with last Friday to 15.09 yuan ($2.24) per kilogram, according to data provided by consultancy China-America Commodity Data Analytics. Even though demand is typically weak at this time of year, prices across the country surged almost 20 percent since early March.

The surge comes with a months-long outbreak of African swine fever having spread to 111 confirmed cases in 28 provinces and regions across the country. There is no cure and no vaccine for the disease that is highly contagious and fatal to pigs, though it does not affect humans. About 1 million pigs have been culled so far in an effort to try to control the spread.

"The main reason (for rising prices) is there are fewer pigs," said Yao Guiling, analyst with China-America Commodity Data Analytics. Some farmers are also reluctant to sell now, she said, anticipating further tightening of supplies and higher profits in coming weeks.

"Pig production capacity has been falling in the past two years, then in the second half of last year, African swine fever outbreaks further affected restocking, pushing up prices," Yao said.

(For a graphic on 'China's pig prices soar to 14-month high' click https://tmsnrt.rs/2CdU9RE)

Some have also abandoned farming, after government measures to tackle the disease pushed prices too low and made trade impossible.

China's pig herd fell 13 percent in January compared with the same month a year earlier, while the number of breeding sows was down 15 percent from the previous year, according to data from the Ministry of Agriculture and Rural Affairs.

But analysts and traders said farms that can keep out the disease could be in line for bumper profits in coming months.

"Our goal is to survive. If we survive, life afterwards will be good," said a manager at a major pig producer located in one of the regions that has reported an African swine fever outbreak.

He declined to be named as he was not authorized to talk to the media.

(For a graphic on 'African swine fever puts China's pig industry in peril' click https://tmsnrt.rs/2BjgFIp)

Shares in leading pig farming companies also continued to rise on Monday, as investors bet on tightening pork supplies and strong government support for leading producers.

Top farmer Wens Foodstuff Group Co., Ltd. rose 4 percent, while rapidly growing Tech-bank Food Co., Ltd. was up 3 percent.

(Reporting by Hallie Gu and Dominique Patton; Editing by Kenneth Maxwell)

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