China stockpiles frozen pork to support prices

China, the world's largest pork producer and consumer, has initiated stockpiling of domestic frozen pork to help support pork prices, the commerce ministry said on Monday (Jun 15).

 

Through this decision, the Chinese government aimed to assist loss-making breeders amid a surplus of pigs and weak demand, particularly from millions of jobless migrant farmers.

 

Currently, the pork to corn price ratio is at 5.8 to 1, which is just under the break even point of 6 to 1, according to statistics from the National Development and Reform Commission (NDRC). 

 

Zhou Wangjun, an official from NDRC, said the commission will choose 140 firms to purchase and 30 storehouses to stockpile pork through bidding invitation.

 

However, industry analysts were hesitant whether this government move would help much in supporting pork prices as the stockpiling failed to support Dalian corn and soymeal futures prices, which are the feed ingredients.

 

About 74 domestic pork producers have been approved to join the state stockpiling campaign, said the ministry's spokesman, Yao Jian. He added that the government will stop its stockpiling program once domestic pork prices have stabilised.

 

Meanwhile, Qiao Yufeng, vice-president of China Animal Husbandry Association, said government subsidies have resulted in the excess hog supplies and he noted that breeders would likely reduce the numbers of pigs raised in order to boost prices.

 

According to Qiao, the current number of breeding sows which is at 11 percent of the pig inventories is higher than the normal level of about 9 percent.

 

China's pig inventories stood at 448.61 million heads by the end of March, of which 49.42 million were breeding sows, according to figures released by the NDRC.

 

China started subsidising breeders two years ago when a decline in the hog supplies coupled with animal disease pushed the country's pork prices to a record high level, which also drove the country's inflation to a decade-high level.

 

Since early this year, the wholesale price of fresh pork fell 26.5 percent, the ministry figures showed.