Currency devaluation by China sparks pork market debate

China’s decision to devalue its national currency, the yuan, by 1.9% is unlikely to have too much short-term impact on the pigmeat trade, although the move does raise longer term concerns about the state of the Chinese economy, says AHDB Pork’s market specialist manager, Stephen Howarth.

“It’s a relatively modest devaluation and won’t dramatically affect import prices,” he told Pig World, in reaction to today’s devaluation announcement by China’s Central Bank.

“Chinese pig prices are pretty high at the moment (the highest for around 2.5 years according to one price series I’ve seen recently) and supplies are tight. This is likely to remain the case for the rest of this year, at least, with reports suggesting the pig herd is 10% smaller than a year ago (and the breeding herd down even more).

“There is therefore room for imports and price shouldn’t be too much of an issue.”

He then added, however, that he believed it was “more concerning” what the devaluation says about the state of the Chinese economy and the government’s ability to manage it in the longer-term.

“It follows on from falls on the stock market and a range of disappointing economic data,” he said. “This could have an impact on consumer confidence in China, which may affect demand for meat in due course, with pork probably most affected as it is by far the leading meat in China.”

All of which could mean the growth in the Chinese economy slowing even further, making the country a less important destination for exports in the future.

Mr Howarth (pictured above) agreed, however, that the longer-term picture remained “speculative” for the moment with much depending on how things develop from here.

“Probably not a case for making too much change yet,” he added, “but the situation is certainly worth watching.”

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Freelance journalist Colin Ley is Pig World's website news reporter