A customer buys pork in a spot that sells national reserved pork in Dalian, Northeast China's Shenyang Province in January. Photo: VCG

With more non-agricultural enterprises from internet giants to property developers eagerly moving into the pig farming industry, pork oversupply might occur in the next two years and the downward trend for pork prices is clear in China, a senior executive said Monday.

However, this year will still see high pork prices due to the shortage of supply caused by the COVID-19 pandemic as well as African swine fever (ASF), Liu Yonghao, chairman of China's agricultural conglomerate New Hope Group, told reporters on Monday.

China has made advances in containing ASF as no major regional outbreak of the disease has occurred since August 2018 when the first case was confirmed in Northeast China's Liaoning Province, said Han Changfu, minister of agriculture and rural affairs.

Hog production recovery has gained momentum, as the number of breeding sows in stock has continued to expand in the past three months and the prices of live pigs kept retreating for 12 consecutive weeks, Han said on May 12.

Liu estimated that hog production would climb steadily starting next year as more players are making forays into the sector, which will help enhance the standard of pig breeding. 

Chinese property developer Vanke announced on May 7 it would recruit people for several positions including veterinarians, pig farm managers and construction application specialists, a move seen as the developer's entry into the agricultural sector, following its peers like Evergrande.

Such trans-sector behavior is not uncommon in China, as e-commerce giants including Alibaba, NetEase, and JD.com, have also diversified into pig farming. 

"Overcapacity is also likely to occur, probably leading to a drop in pork prices in 2022," said Liu.

Hog-raising is a long-cycle business that is reliant on heavy investment, he added, while pointing out the company's advantages in cost control based on modernization and digitalization.

The production costs of New Hope's hogs can be as low as 11 yuan ($1.55) per kilogram on some its farms, according to Liu.

As the world's largest consumer of pork, China's inelastic demand for hogs could reach up to 600 million per day, according to Liu, adding that the country imported over two million tons of pork last year, up 75 percent on a yearly basis.

In the first quarter of 2020, China imported a record 951,000 tons of pork, up 274,000 tons from the previous period. Of that amount, 168,000 tons came from the US, up 6.4 times year-on-year.

"China is actively implementing the phase one trade deal with the US and is buying a lot of US agricultural products including soybeans and pork," Liu noted, adding that the imports will help balance pork price hikes.

Liu, who also serves as a member of the national committee of the Chinese People's Political Consultative Conference (CPPCC), China's top political advisory body, suggested in his proposal to the annual "two sessions" that the country establish a hog industry development fund or issue special bonds at the national level to support recovery in the epidemic-hit industry.