April 29, 2010

China pork prices are expected to remain high in the second half of this year after low meat prices and high feed costs forced farmers to reduce livestock numbers, further boosting food price rises.

"I am afraid that farmers cannot break even and will have to kill pigs," said Liu Yonghao, chairman of New Hope Group, a domestic feed producer and agribusiness operator. "If livestock numbers fall, prices will go up."

Statistics of the Ministry of Agriculture show the average pork price was RMB17 (US$2.49) a kilogramme in March, down 7% from February. The price declined slightly in the first two weeks of April, averaging at RMB16 (US$2.34) per kilo.

Farmers are also squeezed by high feed prices as grain prices advance. By the end of March, corn prices had risen for 21 weeks. As of March, pig feed prices had seen a 9% on-year increase.

In an effort to stabilise pork prices and help pig farmers, the government launched two purchases of livestock this year, both in April.

According to a statement from the Ministry of Commerce, hog prices gained 1.3% last week, posting a second week of gains after a three-and-half-month decline.

Government purchases are just a temporary measure. Liu said the fundamental solution to end the fluctuating pork price is intensive farming, because small farmers do not have the resources to undertake market research and hedge risks.