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By Hallie Gu and Dominique Patton
BEIJING, June 9 (Reuters) - China's state planner said on Wednesday it plans to boost the role of state reserves in stabilising hog production and pork prices, after a more than 50% plunge in pork and hog prices since the start of this year.
China's pork industry is recovering from an outbreak of the deadly African swine fever virus that devastated the hog herd during 2018 and 2019, but prices this year have fallen far more steeply than expected, analysts said.
Current hog prices of about 15.6 yuan ($2.44) per kilogramme are below the break-even point for many farmers, which could push some out of business, and lead to a substantial hit to supply later on, said Li Ming, analyst with Myagric.com.
"The risk is high that the markets will be quite volatile," he said.
The National Development and Reform Commission (NDRC) said in a statement it plans to improve the way its pork reserves operate to help stabilise hog production and pork prices.
"Recently, with the 'pig cycle' on top of the African swine fever epidemic and the coronavirus epidemic, the normal operation of the pig industry is seriously affected," it said.
China has held an undisclosed volume of frozen pork for years but the reserve is estimated to be too small to significantly influence the market.
The NDRC said it will significantly increase its stocks, but did not give further details.
It will also set up an additional temporary reserve that will play a more active role in setting prices by buying from the market when prices fall too low and releasing stocks when supplies become tight.
The NDRC said it also plans to adjust an early warning system that is in place to alert the authorities to declining pig production profits, which can lead to large fluctuations in supply and prices.
It has raised the break-even hog to grain ratio to 7:1 from 5.5:1 previously, apparently reflecting higher production costs after farmers were forced to invest more in farm hygiene to protect against African swine fever.
Currently the ratio is around 5.4:1, based on a hog price of 15.56 yuan per kg and corn prices at 2.87 yuan per kg.
However it will also consider retail pork prices and stocks of breeding sows when issuing warnings in the future, said NDRC.
($1 = 6.3941 yuan) (Reporting by Hallie Gu and Dominique Patton; Editing by Richard Pullin & Simon Cameron-Moore)
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The Link LonkJune 09, 2021 at 11:47AM
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UPDATE 2-China to boost role of pork reserves in stabilising market - Successful Farming
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