August 9, 2011
China's intervention measures may disrupt hog market cycle
China's intervention measures to address soaring pork prices, including the RMB2.5-billion (US$389-million) investment programme to support large-scale hog farms, are likely to disrupt the natural market cycle, according to market observers.
"Industry insiders are not optimistic about the hog investment programme, as this will slow the progress of market recovery. Not only does it not play a catalytic role, on the contrary, it will have a negative impact on the market," said Fang Shijun, eFeedLink's senior analyst.
Pork prices in China rose 57% from a year earlier in June. Fast-rising pork prices were a key factor that drove the consumer price index close to a three-year high in June, up 6.4% from a year earlier, according to the National Bureau of Statistics (NBS).
"Stabilising the price of pork is the government's inescapable responsibility," Premier Wen Jiabao said at a State Council meeting on July 12.
Pork prices have been rising after an outbreak of disease two years ago led to a cull of livestock and delays in boosting production.
It has been reported that some analysts say that the government's measures may take four-six months to show results, in line with the amount of time it takes to rear a pig for slaughter.
However, Fang thinks otherwise. "The investment programme cannot ease the current shortage of hog supplies," he said. "In 2007, when China's hog supplies were tight, the Chinese government announced a similar support programme, but it was not implemented by the local government."
"For the second half of the year, I expect hog prices to stay high," said Fang.
There are 200,000 tonnes of pork in reserves, which will be released into the market as and when needed, according to the Ministry of Commerce.
Current reserves of pork are equal to one or two days worth of China's total pork consumption, according to analysts.
China's total pork consumption in 2011 is forecast at 52.7 million tonnes, a 3% increase from an estimated 51.2 million tonnes in the previous year, according to a report by the USDA Foreign Agricultural Service in Beijng. Per capita pork consumption is expected to grow from 37kg in 2009 to 39kg in 2011.