China buys frozen pork to stabilise prices

08-08-2012 | | |
China buys frozen pork to stabilise prices

China’s government will again purchase frozen pork to stabilise the market, as increases in hog production have prompted a fall in prices, Xinhua reports.

Due to a slack season and continued overproduction, pork prices have shown signs of sliding and likely remaining low for a period ahead, the National Development and Reform Commission, country’s price regulator said in a statement on its website.

Pork prices have generally shown a declining trend this year. In April, the hog-to-corn price ratio, a major indicator of the sector’s profitability, fell under 6 to 1, the break-even point for farmers.

To avoid drastic price fluctuations, the government then initiated a round of frozen pork purchases. Price drops narrowed in May and reversed to moderate gains in June and July.

Food prices have a one-third weighting in the calculation of China’s consumer price index, the major gauge of inflation, with pork prices being an important component.

The country’s volatile hog market has made the government’s efforts at controlling prices extremely difficult over recent years. Pork prices were the main cause behind last year’s high inflation.

The Commission has advised farmers to weed out low-yield reproductive pigs and optimise the production structure to reduce losses.

More about