Negative “Olympic impact” on pork consumption in China

by Editor
Monday, August 18, 2008

With hundreds of millions glued to home television sets and factory canteens running on low speed, the normal summer lows of pork consumption are being exacerbated by China’s hosting of the Olympic games. This lull comes as China’s hog herd has expanded close to double-digit levels year on year, with producers responding to strong industry profitability over the past nine months.

Reports from USMEF (U.S. Meat Export Federation) offices in China point to a negative “Olympic impact” on pork consumption. The effect is more pronounced in Beijing, where tourists have not offset the sharply reduced local customer traffic in many restaurants. Some have even chosen to close for the three-week run of the Olympic games. USMEF-China also notes that urban clean-up campaigns linked to Olympic events have curtailed street-hawker activity. As a result, huge volumes of imported pork and poultry products have stacked up in Chinese cold stores, with some facilities reporting 100% capacity. National distribution of imports has also been affected by the Olympics, as increased security on roadways has slowed product movement. Finally, falling domestic prices have narrowed the spread between the wholesale prices for imported pork and local products.

Domestic boneless fresh pork prices in large urban areas have dropped between 15% and 20% from the high point reached in February 2008. In late July, China’s ministry of agriculture announced that its total mid-year live hog inventories have increased by more than 9% from year-ago levels. More importantly, sow numbers are up 22.5%.

The Chinese government has announced significant subsidies for investors in development of large-scale hog farms. Over the past three months, USMEF is aware of at least six major company announcements of intentions to invest in these large-scale farms. Among these announcements are reports of major investments by Goldman Sachs - which already has a stake in China’s two largest meat processors - and Deutsche Bank.