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Pig prices rebound after government increases reserves

By Chen Yang (Global Times)

07:56, June 26, 2012

The central government's move to boost pork reserves has taken effect, and prices of live pigs have risen recently after continuous declines over the past four months, China's top economic planner said yesterday.

The country's average farm-gate price for pigs rose to 14.08 yuan ($2.21) per kilogram on June 13, up 1.01 percent from a week ago, after experiencing a continuous drop in the previous four months, the National Development and Reform Commission (NDRC) said in a statement yesterday.

After the pig-to-corn price ratio had fallen below 6 to 1, the break-even point for pig farmers, for four consecutive weeks, the NDRC started State procurement of frozen pork from the market in May to increase national reserves and protect farmers against market volatility.

The commission said there is still a problem of overcapacity in the pig breeding industry, and advised farmers to reduce stocks of fertile sows.

Farmers increased their pig stocks in 2011 when pork prices surged, which drove up supplies and pushed pork prices down this year, industry experts said yesterday.

"Pig prices will rise further in the third quarter, as their death rate in the summer heat is usually high," Ji Guangxin, an analyst at Sublime China information, a Shandong-based commodity information provider, told the Global Times yesterday.

"Most pig farmers lost money in the first five months of this year, but the rising prices will improve their profit margins," Ji said.

Meanwhile, retail prices of pork in China's 50 biggest cities have also begun to rise since June 10, the first rise since February, figures from the National Bureau of Statistics showed Sunday.

"Pork prices, which make up a large part of food prices in China, will continue to rise and may push inflation up in coming months," Ma Wenfeng, an analyst at Beijing Orient Agribusiness Consultants, told the Global Times yesterday. The country's consumer inflation eased to 3.0 percent in May from 3.4 percent in April.

Despite price fluctuations, the pig breeding industry has attracted some big companies and investors.

Wuhan Iron & Steel Corp unveiled a pig-raising plan in March. The State-owned COFCO Trust Co also released a pork industry financial product in May and so far has raised 15 million yuan. The money will be invested in breeding pigs in Dongtai, Jiangsu Province, and investors' returns will depend on pork prices in the future.

"Big companies' participation will make the pig breeding industry more consolidated, and the price fluctuations will become less severe," Ma said.

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