China has culled nearly 100 million hogs and 10 million sows over the past 18 months–the largest hog culling by the country in several decades and an amount equal to the combined herds of Mexico the U.S. and Canada combined, according to a recent report issued by Rabobank.

 

After an over-expansion between 2011 and 2013, many small producers have exited the industry, leaving a smaller, leaner, more efficient sector in their place. The reduced herd will lead to a 6.5% decline in production to 53 million tons, and a 5.3% decline in consumption to 55 million tons this year, resulting in imports climbing to 1.9 million tons this year, according to Rabobank. The rebuilding of the herd is not expected to happen quickly and imports for 2016 are expected to remain level with 2015.

 

The EU is the best positioned to be able to take advantage of the uptick in demand, however the availability of pork that is free of the growth-promoting drug, ractopamine will be a key factor in the U.S. gaining a share of the market. Fifteen U.S. plants, representing about half of the country’s processing capacity, are banned from exporting to pork to China after traces of ractopamine were discovered in their supplies. Only 20% of the U.S.’s exports are free of the drug, with the bulk of those exports originating from Chinese-owned Smithfield Foods Inc.

 

Rabobank expects China’s domestic pork supply is expected to increase in the second half of 2016, but its import levels will also keep climbing as the country becomes increasingly important in absorbing the world’s excess supply.

 

“The surge in pork trade could not come at a better time as the global pork sector is in the midst of a supply glut,” the analysts said. “Even small changes in China’s pork industry have a notable impact on the global market.”