July 30, 2010

China's pork prices surpass break-even point

Pork prices in China have risen for seven consecutive weeks, bringing the market above the break-even point that it fell below in April, the National Development and Reform Commission said Thursday (Jul 29).

Pork prices are an important determinant for farmers' willingness to rear hogs, in turn a key source of demand for grains used in livestock feed.

As a result of oversupply since December last year, hog prices in China slid continuously and touched their lowest level of RMB9.68 (US$1.43)/kg. The price ratio between hogs and grain, an indicator of the profitability of hog breeding, was five to one, below the break-even point of six to one.

To curb the excessive decline of hog prices, the NDRC, the Ministry of Commerce, and the Ministry of Finance decided to build up reserves of frozen pork to stabilise hog prices.

The average hog price in 36 mid-sized and large cities is now RMB12.23 (US$1.81)/kg, while the price of second-grade wholesale corn is RMB2.02 (US$0.30)/kg, giving a ratio of 6.05 to 1.

The ratio had fallen to five to one in April, discouraging hog-rearing.