Pig Prices Rebound After Govt Increases Reserves

by 5m Editor
26 June 2012, at 9:39am

CHINA - The central government's move to boost pork reserves has taken effect, and prices of live pigs have risen recently after continuous declines over the past four months, China's top economic planner said.

The country's average farm-gate price for pigs rose to 14.08 yuan ($2.21) per kilogram on 13 June, up 1.01 per cent from a week ago, after experiencing a continuous drop in the previous four months, the National Development and Reform Commission (NDRC) said in a statement.

After the pig-to-corn price ratio had fallen below 6 to 1, the break-even point for pig farmers, for four consecutive weeks, the NDRC started State procurement of frozen pork from the market in May to increase national reserves and protect farmers against market volatility.

The commission said there is still a problem of overcapacity in the pig breeding industry, and advised farmers to reduce stocks of fertile sows.

Farmers increased their pig stocks in 2011 when pork prices surged, which drove up supplies and pushed pork prices down this year, industry experts said yesterday.

"Pig prices will rise further in the third quarter, as their death rate in the summer heat is usually high," Ji Guangxin, an analyst at Sublime China information, a Shandong-based commodity information provider, told the Global Times.

"Most pig farmers lost money in the first five months of this year, but the rising prices will improve their profit margins," Dr Guangxin said.

Meanwhile, retail prices of pork in China's 50 biggest cities have also begun to rise since 10 June, the first rise since February, figures from the National Bureau of Statistics showed Sunday.

"Pork prices, which make up a large part of food prices in China, will continue to rise and may push inflation up in coming months," Ma Wenfeng, an analyst at Beijing Orient Agribusiness Consultants, told the Global Times. The country's consumer inflation eased to 3.0 per cent in May from 3.4 per cent in April.

Despite price fluctuations, the pig breeding industry has attracted some big companies and investors.

Wuhan Iron & Steel Corp unveiled a pig-raising plan in March. The State-owned COFCO Trust Co also released a pork industry financial product in May and so far has raised 15 million yuan. The money will be invested in breeding pigs in Dongtai, Jiangsu Province, and investors' returns will depend on pork prices in the future.

"Big companies' participation will make the pig breeding industry more consolidated, and the price fluctuations will become less severe," Dr Wenfeng said.