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China to Buy 40,000T of Pork for State Reserves in Bid to Support Poor Pork Prices

China will buy 40,000 tonnes of pork for its central state reserves this week, in the first round of such stockpiling this year, China Merchandise Reserve Management Center said on Monday.

China is seeking to support hog prices after a sharp fall following the Lunar New Year holiday, when excess supply and flat demand weighed on the market.

"The goal of stockpiling is to stop the market prices from excessive fall, to improve supply-demand balance, and boost prices (of pork) and the confidence of farmers," said Wang Zuli, researcher at the Institute of Agricultural Economics and Development under the Chinese Academy of Agricultural Sciences.

China will buy 19,400 tonnes of pork on Thursday, and then another 20,600 tonnes on Friday, for the state reserves, according to separate statements on the reserve management centre's website.

The state planner will also guide local authorities to actively buy pork for local reserves, the National Development and Reform Commission (NDRC) said on its public WeChat account.

Hog prices in Luohe, located in major producer Henan province, fell 10% after the Lunar New Year holiday, to 12.6 yuan ($2.00) a kilogramme, with farmers in the region losing 408 yuan per pig as of last Friday.

Local governments in places including Beijing, Chongqing, and Hubei have already started buying pork for the reserves, while other regions would launch the stockpiling recently, according to the NDRC statement.

China would step up pork purchases for the reserves when necessary, to facilitate a stable market, the statement said.

Beijing last stockpiled pork for the reserves in 2021, after prices of pork plunged due to increased supply.

China's sow herd by end of January, at 42.9 million heads, were at normal levels. The figures fell 0.9% from the previous month, according to the agriculture ministry.

"Low pig prices and high feed costs are squeezing hog margins on both ends, leading to even bigger losses, which could speed up production cut. If production falls below normal levels, there will be a risk for another round of hog price hike," said Wang, the researcher.

"The government wants to stabilize the prices and eventually stabilize production capacity," Wang added.

Pig prices in China hit record high levels in 2019, after a deadly African swine fever disease decimated the country's massive pig herd.

($1 = 6.3072 Chinese yuan renminbi)

Par : Hallie Gu et Emily Chow (28/02/2022)

Source : Reuters via

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