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Translation - English
At the Lishan Road Darunfa supermarket in Shandong’s capital city, Jinan, customers are asking after pork prices at the butcher’s counter.
Spring has come and as the weather gets warmer, vegetable prices are falling across China, but pork prices have remained high. Experts believe that a number of factors, including disease outbreaks, cold, and high feed prices, have caused prices to remain high. However, the primary factor is that despite high prices, swine breeding stock has continued to decline due to a cyclical phenomenon known to economists as the ‘Pork Cycle’.
Pork prices up 40% year on year
According to Sun Liang, a member of the Shandong survey team for China’s National Bureau of Statistics, pork prices are running high, up 40.9% year on year and increasing 4.7% last month despite an overall Consumer Price Index (CPI) increase of only 3.4%, month on month.
Data from the Shandong Province Bureau of Animal Husbandry and Veterinary Information Center reflects that during the 18th week of 2016 (May 2- May 8), the province’s live hog prices continued to rise, breaking the RMB 10 per jin mark (USD 3.06 per kg), a new record high. This week, Shandong’s live hog price reached RMB 20.24/kg (USD 3.09/kg), 49.15% increase year on year and rising 1.61% with respect to CPI. Pork prices have reached RMB 31.84/kg (USD 4.87/kg), rising 1.99% with respect to CPI, and 41.64% higher than last year at this time. The hog-corn price ratio is 12.27:1, an increase of 107.91% year on year. Corn prices have remained low and pig breeding and finishing operations have only become more efficient; the average profit per fattening pig now averages above RMB 600 — better than even the best periods of 2007-2008.
Piglet prices are also rising sharply. The current average price for live piglets has reached RMB 43.94/kg, breaking records set in 2008, and reflecting a 106.29% increase year on year. The highest priced piglets are fetching RMB 71/kg.
In early April, China’s National Development and Reform Commission issued a document projecting pork supply will remain tight until after September, on the basis of the pig breeding cycle and the current structure of supply and demand. The document suggested a new round of adjustment might occur after the Chinese New Year holiday in early 2017.
Supply and demand are key
When pork prices are too low it harms pig farmers, when prices rise the financial burden falls on consumers. How can the ‘pork cycle’ be disrupted?
Since the end of 2015, the Shandong Province Price Bureau has collaborated with five other departments to pilot a target price insurance system for live hogs that will allow pig farmers to buy insurance against the risk that prices will fall too low. The target price will be determined on the basis of the hog-corn price ratio and will remain stable for a period of 12 months. If, during the year, the hog-corn price ratio falls below 5.8:1, farmers participating in the pilot insurance system will be eligible to file claims and collect compensation on the basis of the contract details.
Additionally, in order to stabilize pork prices, China’s government will continue to purchase pork and release pork from the country’s strategic pork reserve. Recently, pork has been released from reserves across China to assuage record high prices. However, the volume of pork released thus far has been small to negligible given the scale of supply and demand. Some experts suggest that the reserves are merely a political tool — any real effort to moderate high prices must address supply and demand.
Mr. Wen Xuesu, vice president at Beijing Dabeinong Technology Group, has suggested another approach: a network of pigs, coordinating the huge number of small scale pork producers into a huge and powerful association. Large pork producers are more competitive and profitable, but smaller operations often lack the management experience. A network would allow small hog farms to share data and procure feed and other inputs together at better prices. By analyzing the shared data, farmers could better predict when to breed, purchase, and slaughter, improving overall production efficiency.
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Years of experience: 19. Registered at ProZ.com: Apr 2008.
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