August 9, 2012
China adds to pork reserves to stabilise prices
The Chinese government will again purchase frozen pork to stabilise the market, as continued hog overproduction and slack demand continues to result in falling pork prices.
Pork prices have shown signs of sliding and likely remaining low for a period ahead, the National Development and Reform Commission said in a statement on its website on Monday. Farmers are advised to weed out low-yield reproductive pigs and optimise the production structure to reduce losses.
Pork prices have generally shown a declining trend this year. In April, the hog-to-corn price ratio, a major indicator of the sector's profitability, fell under 6 to 1, the break-even point for farmers. To avoid drastic price fluctuations, the government then initiated a round of frozen pork purchases. Price drops narrowed in May and reversed to moderate gains in June and July.
Food prices have a one-third weighting in the calculation of China's consumer price index, with pork prices being an important component. The country's volatile hog market has made the government's price control efforts extremely difficult over recent years. Pork prices were the main driver of the sky-high inflation figure last year.
