A Chinese central government has administered a regulation that could prevent large declines in hog prices with a view toward stabilising hog production and hog prices in order to protect the interests of hog farms.
The Chinese regulation sets out measures to be taken in the event that certain levels of hog price declines occur. Decline levels are based on pre-established "Grain-to-Hog" price ratios, the number of slaughtered sows and monthly sow inventories. Depending on the severity of any decreases in hog prices, the Chinese government shall implement one or more of the following strategic initiatives: publish hog price decline warnings, purchase market hogs for its strategic reserve, grant subsidies to farms, or adjust pork imports and exports.
Hog farm subsidies
The government may also take other remedial action. In the event of a sever drop in hog prices, hog farms in the largest hog producing areas will receive a subsidy of $15 for each gestation sow and nationally designated hog breeding farms will receive a subsidy of $15 for each breeding boar.
As part of the regulation, the Government vowed to promote the collaboration between large pork consuming areas and large hog producing areas. For example, large pork consuming areas are encouraged to sign long-term supply agreements with large hog producing areas and to set up hog production plants in large hog producing areas.
In addition, hog farms are encouraged to negotiate long-term sales contracts with slaughter houses and wholesale markets to maintain hog price stability. In addition, the Government plans to strengthen pork quality inspection to ensure feed safety and to address unreasonable government taxes and fees to hog raising, transportation, slaughtering and hog sales.
Importance of pork to economy
AgFeed Industries, the countries largest commercial hog producer is pleased with the action. "The action taken by the Chinese government," stated Dr. Songyan Li, AgFeed's Chairman, "underscores the importance of pork to the Chinese economy and the dietary preferences of the people of China. We are pleased that the government has taken this action and we are hopeful that these measures will result in a stabilisation of our pork prices and have a positive impact on our operations going forward."
Gerry Daignault, AgFeed's COO adds that, "the recent government action gives confidence to AgFeed's future investment plans, which include modernisation of our pork production facilities, investment in our employees, environmental programs and bio security. These actions are part of our effort to, among other things, assure consistent high quality and safe pork."
• Agfeed Inc