(Bloomberg) -- China’s shrinking hog herd is likely to curb feed demand this year, affecting imports of staples like soybeans and corn used as animal fodder.

Chinese pig farmers have regularly seen their margins drop below zero in recent years. That’s forcing them to cut production to stem losses.

“We can’t be too optimistic about China’s demand,” Li Qiang, chief analyst at Shanghai JC Intelligence Co., an agricultural consultancy, told an online conference on Thursday. With production capacity for hogs, and also broiler poultry, falling, there’s unlikely to be any increase in feed consumption, he said.

China’s hog herd is the world’s largest, but sow numbers are dropping. They were 6.9% lower at the end of February compared to a year earlier, and the agriculture ministry has cut its target to 39 million head from 41 million, the first drop since the goal was introduced in 2021. Feed output, meanwhile, fell 3.6% in the first two months of the year.

That has implications for farmers as far afield as the Americas, who supply most of China’s feed. China’s grain imports actually climbed in 2023, despite the country’s economic slowdown, which risks creating a glut if conditions don’t improve. Much depends on whether Beijing’s efforts to stimulate growth will crack the deflationary pressures embedded in the economy and allow demand to recover.  

In the meantime, fewer animals will mean less demand for soybean imports, particularly as China’s own crop of the oilseed expands, Darin Friedrichs, co-founder of Sitonia Consulting Co., told the conference.

According to JCI’s forecasts, soybean imports in the marketing year that begins in October could drop 1.3% to 99.5 million tons, while China’s total animal feed consumption may fall as much as 1.5% in 2024.

“It will be hard for China’s imports to maintain the previous year’s level,” said JCI’s Li, although some relief may come if state-owned traders use weaker prices as an opportunity to step up purchases for the nation’s reserves, he said.

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