July 19, 2011

 

Chinese pig farmers fear looming downturn in pork prices

Pig producers in China said they were concerned about the recent surge in pork prices, citing fears that the current boom might prompt vast profit-driven expansion and lead to price plunge.

 

Latest statistics show China's pork prices surged 57% on-year in June, stoking inflation worries while setting pork suppliers fidgeting upon the potential shake-up in the industry.

 

Shang Yudong, a pig farmer in central China's Henan province, said this year's price hike was evocative of the year 2008, when a soaring pork price fuelled an unfettered production expansion, resulting in a glutted market and flagging prices in 2009 and 2010.

 

Shang said if a similar price fall should occur, much of the profit he earned from this year's higher prices would be wiped out.

 

Yin Zhongquan, who owns a pig farm in southwest China's Sichuan province, said it had been difficult for pig farmers to keep much wealth after all these years of rise and fall of pork prices.

 

"The alternation of profit-making and loss-making years is a common complaint among pig farmers. Instead of extravagant profits, we now pray more for a stable price and a reasonable profit," said Yin.

 

China leads the world in the volume of pork produced and consumed every year. Yet despite the huge consumption, China's pork is largely supplied by small backyard farms, which have been the contributors and victims to the price fluctuations.

 

"About 60% of Chinese pig farms are small ones that produce fewer than 50 hogs each every year," said Li Binglong, professor at China Agricultural University.

 

The small farmers, lacking market information, were easily tempted into overproduction in boom times but usually lacked the ability to tide over difficult times when the prices were pulled down, said Li.

 

According to a report by the Ministry of Agriculture, during the past two years when pork prices had been low, over half of the country's pig farmers reported losses, and many either closed farms or butchered their sow pigs to reduce production.

 

The result was that a 4.8% decline in the live pig supply in the first half of 2011, which, together with the rising cost in feed and labour, drove up this year's pork prices.

 

On Wednesday (Jul 13), the Chinese central government introduced policies to both "drive down pork prices in the short-term" and to "avoid price fluctuation in the long-term."

 

The central government said it would invest heavily in the large-scale pig farms and raise subsidies to encourage pig farmers to stay in the business.

 

Experts have suggested that the central regulators have a long-term approach and establish a price guiding mechanism that can help restore a lasting stability in the pork price and move the industry back to track.