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Chinese pig prices rise as Beijing shutters polluting farms
September 29, 2017 / 8:38 AM / 21 days ago

Chinese pig prices rise as Beijing shutters polluting farms

* Prices up as govt closes down farms near cities, lakes

* Pig prices up about 16 pct since June

* Industry sees further jump next year as closures continue

By Dominique Patton

BEIJING, Sept 29 (Reuters) - Pig prices are on the rise in China as Beijing shutters thousands of farms in a drive to impose tough new pollution standards by December, giving the country’s leading pork producers a better-than-expected boost.

China’s three-year campaign to clean up its farm sector requires each province to ban livestock production near water sources or major population areas. Farms in other areas must also meet high standards on treatment of animal waste.

With authorities in major pig-farming provinces Shandong, Henan and Sichuan rushing to complete the requirements over summer months, hog prices JCI-HOG-CHNDU have jumped 16 percent since early June to 14.8 yuan ($2.22) per kg.

“Current prices are more than we expected,” said an executive at one of the country’s top 10 hog farmers. Hog feeding margins in Shandong JCI-HOGM-SHND are currently around 270 yuan per pig, the lowest since mid-2015 and down over 50 percent since early April.

China produces about 55 million tonnes of pork a year, or half the world’s supply.

The higher prices come ahead of the Mid-Autumn Festival and national Golden Week holiday, a period of high demand. But producers had expected prices to be weaker after they hit record levels in 2016, spurring a flurry of investment in new farms.

Around 23 million pigs have been eliminated in 10 southern provinces since 2015, said the agriculture ministry.

In the first half of 2017, 200,000 hog and poultry farms were closed, according to the environment ministry. There could be many more in the run-up to the year-end deadline, according to a report by Essence Securities in August.

In Sichuan province, the country’s top producer, about 800 farms were shut and hundreds more relocated by early August, it said.

In Shandong, environmental restrictions have been more severe than expected for a region targeted by Beijing for further expansion, said Feng Yonghui, analyst at Soozhu.com.

Many farms will be required to install expensive equipment to stay open.

“On the one hand it impacts supply, and on the other it impacts costs. It’s all pressure on prices for the long-term,” said Feng.

Prices are set to rise as much as 20 percent by next year, when the full impact of the farm closures is felt on the country’s sow herd, said Song Weiping, vice president at feed and swine producer Beijing Dabeinong Technology Group .

“It’s bullish, though not entirely,” he said, noting the high costs of meeting environmental standards in large farms.

China’s agriculture ministry said in a statement there were no fears regarding supply. “We expect the hog herd to slightly drop by the end of 2018 but production capability and efficiency continues to rise,” the ministry said.

Others said farmers are sceptical about whether the government will enforce orders and are waiting to see if action is taken in December before shutting down. ($1 = 6.6578 Chinese yuan renminbi) (Reporting by Dominique Patton; Editing by Kenneth Maxwell)

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