Pig prices in China fall below US levels
The current price for live pigs in China has dropped to RMB15/kg ($2.34) due to a mix of more hog inventory, bigger market hogs, huge frozen pork import, liquidation of cold storage and panic sales by farmers. This is the first time when China's pig prices are below the US market and that may signal a decrease in imports for the following months, according to a commentary from Jim Huang, Futures Market Executive.
"In my opinion, the downward price trend for four months straight is driven by improved hog supply and low pork demand. This is consistent with the late stage of a Hog Price Cycle. Hog price would not reach bottom until pork demand comes back in September. With a negative spread between China and US pork price, China would likely reduce frozen pork import in the second half of the year," he said for Swineweb.
Presently, China Customs imposes an 8% import duty and 9% VAT tax on frozen pork but US pork has a special treatment. During the height of the Trade War, import duty was raised three times to 72%. With the signing of Phase 1 US-China Trade Agreement in January 2020, import duty is now down to 33%, plus the 9% VAT. "The headwind for US pork export is no longer the unpredicted government policy, but purely economic forces at work," believes Mr Huang.
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