Iran War Raises China Feed Costs as Hog Prices Hit Lows

Pig producers in China are facing a deepening financial crisis as the conflict in Iran triggers a sharp rise in global animal feed costs. The surge in expenses arrives while the industry is already struggling with a massive supply glut and pork prices that have reached 16-year lows. Since the start of the war in late February, futures for soymeal and corn have climbed to multi-month highs on the Dalian exchange, driven by a rally in oil prices, surging freight rates, and the rising cost of fertilizers. In March, spot prices for soymeal jumped by 7%, while corn prices rose by 4%. Lin Guofa, a senior analyst at Bric Agriculture Group, noted the direct impact of the geopolitical situation on raw materials. > "Prices for most raw materials used in animal feed have experienced a significant increase in March, partly driven by the ongoing conflict in the Middle East." The price hikes extend beyond grains to essential amino acids and vitamins, which have seen increases ranging from 6% to 77% this month. These mounting costs are hitting producers who are already dealing with a market where cash prices for hogs have fallen to 9.69 yuan per kilogram. With production costs currently sitting between 12.2 and 12.5 yuan per kilogram, farmers are losing an estimated 280 to 350 yuan for every pig sold. Small-scale farmers are particularly at risk of being forced out of the market. Fu Zhenzhen, a feed analyst at Beijing Orient Agribusiness Consultants, highlighted the difficult choice facing these producers. > "For small farmers now, either you sell your pigs cheap or you grit your teeth and bear it, get through this price drop, and then wait for the pig price to rebound." One farmer in northern Hebei province described the current environment as being roasted by fire due to the combination of depressed pork prices and the March spike in feed costs. > "Pork prices are so low, but feed costs have jumped sharply in March." While Chinese authorities have attempted to stabilize the market by purchasing frozen pork for reserves and urging a reduction in sow numbers, overcapacity remains a persistent issue. The national sow herd stood at 39.61 million head at the end of December, still above the recommended level of 39 million. Pan Chenjun, a senior analyst at Rabobank in Hong Kong, suggested that the recovery of the sector depends on how the industry manages its inventory. > "Going forward, pork prices will mainly depend on how aggressively companies trim their herds."