July 25, 2011

Pork prices will likely plunge after the Chinese Lunar New Year next year due to overstocking of piglet inventories and a lack of consolidation in China's pork industry, according to the National Development and Reform Commission Friday (Jul 22).

While prices are likely to be stable to slightly higher during the high-consumption season between the Mid-Autumn Festival and the Chinese new year - September to January - the market may plummet thereafter if hog farmers continue to stock piglets at current rates, said Zhou Wangjun, deputy director of the National Development and Reform Commission's pricing section.

"Piglet prices are now double pork prices, which shows that hog farms are enthusiastically replenishing stocks," he said, adding that current prices, around RMB560 (US$87) for a 7-kg piglet, were out of the ordinary.

The government has taken other measures to alleviate pork shortages, including releasing frozen pork reserves and resuming a RMB2.5-billion (US$388-million) programme to stimulate hog production.

However, the push to revive hog output is skewed in favour of large farms, as the government also pushed for the consolidation of China's hog market, which was described as being too dominated by small-scale producers.

The pork market would stabilise more quickly if every hog farm produced at least 500 hogs a year and had supply agreements with retailers and slaughterhouses to agree on volume and prices, Zhou said.

About two-thirds of China's hog farms are so-called "backyard farms," whose contributions to the market are insignificant individually and carry environmental pollution risks, he added.