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Chinese Ministry to Release Pork Reserves

by 5m Editor
21 July 2011, at 9:34am

CHINA - China will release pork reserves onto the market at the "appropriate time" to help stabilize prices as the country struggles to contain inflation that is rising at the fastest pace in three years.

The government has 200,000 tons of pork in reserve and may increase its stocks, said a Ministry of Commerce spokesman Yao Jian at a regular briefing in Beijing on Friday. Some provinces, including Liaoning, have already released reserves, he said. Mr Yao did not elaborate on when sales may take place.

Prices of pork, the most consumed meat in the world's most populous nation, rose 57 per cent in China last month and accounted for more than one-fifth of the overall inflation rate. High prices have prompted Premier Wen Jiabao to call for more support for pig production to make pork prices "more reasonable" three times in the past two weeks.

"The 200,000 tons of pork reserves won't have too much of an impact on the market because it's too small, even smaller than our previous estimate," said Wang Xiaoyue, an analyst at Beijing Orient Agribusiness Consultant Co. "China consumes more than 40 million tons of pork a year, so 200,000 tons amounts to about one to two days of demand."

Short-term buying by the government may boost prices further, Wang said. The tight supplies are the result of farmers reducing herds after prices declined almost 20 percent in the 15 months through March 2010, according to Mr Wang.

Spot wholesale prices of pork reached a record 25.51 yuan ($3.95) a kilogram on 1 July, according to a weekly index compiled by the Ministry of Commerce. Inflation has breached the government's 4 per cent ceiling every month this year, with consumer prices rising 6.4 per cent in June from a year earlier, the most since 2008.

China will offer subsidies for hog production to prevent excessive increases in pork prices, according to a statement on the Chinese government's website on Wednesday, citing a meeting chaired by Premier Wen.

"Government policies supporting pig production won't have much impact in the short term because the production cycle is very long," said Guo Huiyong, an analyst at Soozhu.com, a hog industry researcher in Beijing.

"The profits for rearing hogs are already enough to motivate farmers, so giving more money won't make much difference."

Given that the production cycle is about a year, supply won't fully recover until February or March next year, he said.