January 17, 2014

China's pork prices fall below cost for first time in 10 years

Despite the fact that China is in the peak season for pork consumption, which kicks off in December and runs through the Chinese New Year period, ample supplies and usually weak demand are pushing down pork prices to the lowest levels in 10 years, according to The China Perspective.

At below RMB14/kg (US$2.31/kg), prices of hogs, which constitute the cost of pork, have dropped to a breakeven point. Figures from National Bureau of Statistics show that in 24 provinces and provincial-level municipalities, hog prices slipped by 7.2% in the first 10 days of January, compared to the previous 10-day period.

On January 13, average hog prices in the country were recorded at RMB13.36/kg (US$2.21/kg), down 3.1% from the previous trading day. As a comparison, August hog prices across the nation had risen 13% since mid-May.

The Economic Information Daily cited the analysis by Feng Yonghui, the chief analyst from a major hog and pork information aggregator in China, for the factors behind the usually low prices.

Feng says that in 2011 and 2012, China had an excess capacity after farmers jumped on the bandwagon of hog farming. The other reason was pork demand came late this year for the season. Demand in southern China recovered 20 days later than usual in late December, though winter is typically the peak season for pork consumption. The Chinese government's pork reserve policy, which is meant to prevent price fluctuations, was also a cause.