Government Intervenes in Fall of Pig Prices

by 5m Editor
15 May 2012, at 8:17am

CHINA - The government announced Monday it will intervene to stop pork prices plunging excessively and shield pig farmers from market volatility.

The National Development and Reform Commission (NDRC), China's top economic planner and price regulator, said it has started purchasing frozen pork from the market to increase national pork reserves as prices have kept falling over the past months.

Farmers increased their hog numbers last year when pork prices were high, increasing supplies this year but pushing prices down since Chinese Lunar New Year.

Zhou Wangjun, deputy head of the Price Department with the NDRC, said the hog-to-corn price ratio, a major indicator of the sector's profitability, has fallen below 6 for the last four weeks due to cyclical fluctuations.

A reading above 6 is considered the break-even point for pig farmers thus the current ratio suggests they are generally making a loss.

Mr Wangjun said the NDRC move will boost the government's pork reserves to regulate the market and "strike a balance" for farmers, retailers and consumers.

The NDRC official advised pig farmers to adjust their farming plans according to price changes to stabilize pig production.

However, farmers reducing their hog numbers drastically could push inflation up next year, as pork prices make up a large part of food prices, which account for about one-third of the weighting in the calculation of consumer price index (CPI).

China's CPI growth eased to 3.4 per cent in April, retreating from 3.6 per cent in March.

Inflation remains a major concern for the Chinese government in recent years and the volatile swine market has complicated the government's price control efforts.

As pork is the most widely consumed meat in China, pork prices were the main driver of last year's sky-high CPI figure of 5.4 per cent, well above the government's control target of 4 per cent.