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Pork Prices May Extend Gains in Second Half of 2010

by 5m Editor
28 April 2010, at 6:11am

CHINA - Pork prices may extend gains in the second half of this year after low meat prices and high feed costs forced farmers to reduce livestock numbers, further boosting food price rises.

"I am afraid that farmers cannot break even and will have to kill pigs," said Liu Yonghao, chairman of New Hope Group, a leading domestic feed producer and agribusiness operator. "If livestock numbers fall, prices will go up."

Statistics of the Ministry of Agriculture show the average pork price was 17 yuan a kilogram in March, down 7 per cent from February. The price declined slightly in the first two weeks of April, averaging at 16 yuan per kilo.

Farmers are also squeezed by high feed prices as grain prices advance. By the end of March, corn prices had risen for 21 weeks. As of March, pig feed prices had seen a 9 per cent year-on-year increase.

In an effort to stabilise pork prices and help pig farmers, the government launched two purchases of livestock this year, both in April.

According to a statement from the Ministry of Commerce, hog prices gained 1.3 per cent last week, posting a second week of gains after a three-and-half-month decline.

Government purchases are just a temporary measure. Liu said the fundamental solution to end the fluctuating pork price is intensive farming, because small farmers do not have the resources to undertake market research and hedge risks.

"Ups and downs are usual in agribusiness, however, individual farmers are often too small to cope," said Mr Liu.

A report from Southwest Securities said pork prices will increase after the hog price rally, pushing up food prices, a major component of the nation's consumer price index (CPI) package. "If CPI for April and May ends up higher than 3 per cent, (the central bank) is very likely to raise interest rates."

Many analysts forecast big gains for pork in the second half of this year. Hu Wenzhou, an analyst at BOC International, said if government purchases can help farmers break even, which means hog price is six times the grain price, the hog price will rise by 10 per cent over last year.