The reason why live hog prices vary between Vietnam and China

DNHN - The complex interaction between supply and demand in each market accounts for the contrasting volatility of hog prices in Vietnam and China.

In recent years, live pig prices in China and Vietnam have fluctuated in opposite directions. While the price of live pigs in Vietnam continues to rise, the price of live pigs in China has remained relatively stable. The interaction between supply and demand in the two markets is primarily responsible for this difference.

In June, prices for live pigs in Vietnam continued to rise. On June 23, hog prices reached their highest level in nearly a year, reaching VND63,000/kg, an increase of 21% from the start of the year. This price increase is a result of the gradual decrease in supply caused by the epidemic's effects and the wave of people abandoning their cages as losses persisted. Due to losses, both small businesses and households struggle to maintain pig production. This has resulted in a shortage of swine, which has pushed up prices. In addition, demand has increased as a result of the tourism industry's recovery, creating a balance between supply and demand and bolstering pig prices.

Mr. Nguyen Van Trong, former Deputy Director of the Department of Livestock Production, stated that both businesses and small livestock households experienced a decrease in livestock supply. Large enterprises can maintain or slightly reduce their herds, but small and medium-sized businesses and households can no longer pursue pig production due to long-term losses.

Mr. Nguyen Nhu So - Chairman of the Board of Directors of Dabaco Group JSC (code: DBC) - stated that live hog prices "absolutely must rise" in light of a sharp decline in the total herd due to African swine fever and small farmers abandoning their farms. Mr. So estimated that the total number of live pigs in the country was approximately 23 million, a decrease from the norm of 28-29 million.

In contrast to the situation in Vietnam, however, the hog market in China is relatively calm. In recent years, the price of live pigs in China has not changed significantly. As of May 23, the price of live Chinese pigs was 14,17 yuan per kilogram, essentially unchanged from the beginning of April and lower than the start of the year. Historically, due to the small-scale trade of pigs between Vietnam and China, the live hog prices of both countries were frequently comparable, especially in the north. However, following the outbreak of the COVID-19 pandemic, China tightened border controls and the trail of openings, causing the prices of live pigs in the two countries to diverge and become primarily dependent on market supply and demand. Localized school.

Another significant factor is China's national strategic reserve policy, which helps regulate hog prices. In recent years, as a result of this policy, the price of live pigs in China has remained stable and has not declined as sharply as in Vietnam. China recently announced that it will continue reserving pork for the national reserve. On the other hand, it is anticipated that China's pork demand will recover over the medium term, particularly when there are positive signals regarding the growth of pork imports from the country. In May, China imported 140,000 tonnes of pork, a 7.7% increase year-over-year. Pork imports are anticipated to continue to rise in the second quarter of 2023 due to a robust rise in consumer demand.

Thus, the opposite movement of hog prices in Vietnam and China is a result of the complex interaction between supply and demand in each market. While the supply of hogs in Vietnam is gradually decreasing and the demand is rising, the supply has not changed significantly in China, and the demand is currently low. China's national reserve policy also contributes significantly to maintaining stable domestic hog prices.

Previously, when the COVID-19 epidemic did not exist, Vietnam and China traded pigs through unofficial channels, so the prices of live pigs in the two countries were comparable. However, after the pandemic, China tightened the border, causing the two countries' prices for live pigs to diverge.

Duc Huy