China plans to increase the country's pork reserves after another week of slumping prices, in the latest move by the government to stabilize the pork market.
Pork serves as the main source of protein in China, the world's biggest pork producer and consumer, and pork prices are a key component of the country's consumer-price index. A retreat in pork prices last November helped China's consumer prices to decline for the first time in the past decade.
Fearing that volatile pork prices could trigger large market fluctuations, the National Development and Reform Commission, China's top economic planner, set up an early warning mechanism and promised to adjust its pork reserves in a timely manner to stabilize hog production and pork prices, according to a statement released in early June.
China doesn't disclose the volume of its pork reserves, which is estimated to be too small to affect the market.
The national average hog-to-grain ratio, a key indicator of profitability in raising hogs, fell to 4.90:1 last week, entering the excessive-decline territory and triggering purchases of reserves, the commission said Monday.
National average live hog prices in China have plunged by around 60% since January to 15.13 yuan ($2.34) a kilogram, the lowest level in two years, according to data released last Tuesday by the Ministry of Agricultural and Rural Affairs. Close to 10% of Chinese hog farmers experienced losses in May, agricultural ministry official Xin Guochang said during an interview with the state broadcaster.
"The basic driving force behind declining pork prices is the expanding supply since the last quarter of 2020, while pork consumption has been picking up at a slower rate," said Chenjun Pan, a senior analyst at Rabobank.
China's pork industry has rapidly ramped up production capacity following an outbreak of the deadly African swine fever that had devastated hog herds in 2018 and 2019. The country's hog population as of May rose 23.5% from a year earlier, returning to levels closer to normal, the agricultural ministry said in June.
Overall pork output is projected to hit 50 million tons in 2021, up 20% from 2020, according to a report by the Chinese Academy of Social Sciences, a top government-backed think tank.
In recent months, a large number of fattened pigs were sent to slaughter amid panic selling by some farmers hoping to avoid additional losses, which authorities and analysts said put further pressure on prices.
China saw a small rebound in pork prices last week as loss-bearing farmers became reluctant to sell, the National Development and Reform Commission said in a separate notice Monday. Pork prices may continue to rebound and a decline in pig breeding could be reduced in the short term, the commission added.
"Pork prices will remain volatile for a while," Rabobank's Pan said, adding that "current low pork prices and strong seasonal consumer demand from August to October will help warm the market up."
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June 28, 2021 at 04:19PM
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China to Increase Pork Reserves Amid Plunging Prices - MarketWatch
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