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China selling pork stocks to curb record prices

The Chinese ministry of commerce aims to stop the ongoing increase of pig prices by rapidly releasing its pork storages on the market.

By doing so, the Chinese hope to get a grip on the ever-growing pig prices, Chinese state news agency Xinhua reports. The Chinese ministry of commerce and 12 local governments, including Beijing, Zhejiang and Shaanxi stated that as from December 2015, already 150,000 additional tonnes of pork have been released onto the market.

Furthermore, Beijing's city council decided that until early July, 3.05 million kg of pork from state storage will be released to the market, Xinhua reports. In addition, slaughterhouses will receive a premium of up to RMB 9 (€1.21) per kg of pork in case they raise their production, so vendors can reduce prices.

Growth of pork prices

Prices grew to approximately RMB 26 (roughly €3.50) per kg, late April – or €2.70 per kg liveweight. Imports in 2016's first quarter almost doubled year-on-year. Prices for consumers therefore grew by 28% year-on-year, also influencing national inflation figures.

Main cause for the ongoing price rises is the reduction of the size of the Chinese pig inventory as a result of stricter legislation. In January 2016, China's total stock of sows was approximately 45 million, according to the latest GAINS report, by the Foreign Agricultural Service (FAS), a department within the United States Department of Agriculture (USDA). In comparison, this was over 50 million in the fall of 2012.

Future expectations in China

Higher pork prices stimulate domestic production, although it might take until 2017 before this is expressed in a larger supply of Chinese pigs, analysts expect.

Chinese state press agency Xinhua reported that HSBC bank expects pork prices 'should start to ease substantially in the second half' of 2016.

Views from US

US sources are less optimistic. The GAINS report, published in April, states: "In 2016, swine production in coastal provinces, where land is generally more expensive, will be under more pressure to close, especially as local governments seek more profitable uses for the land. Rigorous enforcement of environmental laws in these areas is one method employed to encourage these operations to close or move to other regions."

The Financial Times adds to this that according to the US Department of Agriculture (USDA), the influence of the Chinese stock programme is 'insignificant'.

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