Inside Pigs
China fears pig price drop and intervenes
The Chinese government will play a more active role in its own pork market. This should curb volatility in production and price formation. China fears that the recent price drop will lead to shortages in the future.
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A Chinese government-affiliated committee (National Development and Reform) announced today (June 9) that it is pursuing a more active role for the government in the pork market. The most important instrument in this regard is the Chinese state stock of pork. The Chinese government has always had an unknown amount of pork in stock in order to curb strong (food) price increases.
However, much of this stock has been deployed in recent years. China was struggling with a tight supply of pork due to outbreaks of African swine fever (ASF). Prices have recently fallen sharply. The causes of this are increased own production, record high meat imports, but also extra temporary supply caused by farmers who sell their pig herds for fear of ASF. This decline threatens future pork production, the committee notes.
Commission wants to replenish stock 'significantly'
Due to the use of stocks from the national reserves in recent years, the volume of pork stored in the state reserve has shrunk sharply. The committee that unveiled the plans indicates that a 'significant' amount of pork will now be purchased by the Chinese government. This makes it possible for the government to intervene in the market again in the future. No information was given about exact volumes.
In addition to building up new stocks for future use, buying up meat serves a second purpose: to stop the price decline on the pork market. Due to the sharp decline in pig prices in China, it is no longer profitable for some pig farmers to continue pig production and they may sell their pig herd. This could cause shortages to arise again in the future, resulting in sharply rising prices. Buying pork should therefore support pig prices and ensure production is maintained.
The aim of the plan is more stable pricing and production
The main aim of the measures is more stability on the pork market. On the one hand, China wants affordable prices for consumers, but on the other hand, prices must be at such a high level that pig companies can operate profitably. Buying pork in times of low prices and putting meat on the market in periods of high prices now appears to be the main instrument for smoothing out peaks and troughs in price formation.